Coping with rising prices

Inflation concerns many, but there are ways to deal with it

Few economists predict we’ll return to the doubledigit price increases of the late 1970s and early 1980s. But knowing some of the ways consumers coped back then — and how things are different now — can help you formulate a plan to deal with rising prices.

First, a primer: Inflation shrinks your purchasing power, so you need more money to buy the same goods and services. When inflation averages less than 2 percent, as it did from 2010 to 2020, it would take more than 35 years for prices to double. When inflation averages 5 percent, which was the annualized rate reported in

May, prices would double in less than 15 years. That is a huge deal if you live on a fixed income or are trying to calculate how much you’ll need in retirement.

“People forget about the potential impact of inflation, since we really haven’t seen very much,” said Penelope Wang, deputy money editor for Consumer Reports.

Here are some strategies that may prove helpful.

Buy strategically

With persistent inflation, delaying a purchase could be costly, since the price is likely to rise in the future. With today’s inflation, that’s less clear.

Jerome Powell , chairman of the Federal Reserve, said pandemicrelated shortages and bottlenecks are behind recent price spikes. He predicts inflation will ease as the nation’s economy continues to reopen.

That certainly seems to be the case for lumber prices. The cost of lumber increased more than 300 percent from April 2020 to May 2021, adding $36,000 to the cost of the average house, according to the National Association of Home Builders. But lumber prices have retreated substantially from those peaks as pandemic-related shortages ease. If you rushed into a remodeling project or otherwise locked in the high prices, you’re likely regretting it now.

Embrace substitution

High inflation 40 years ago led to the birth of generic groceries — products with stark black-andwhite labels that saved consumers money by forgoing fancy packaging. Today, you can get similar savings by substituting store brand products for name brands. Warehouse stores, such as Costco and Sam’s Club, also got their starts during that period and remain a good source for bargain hunters.

Acquiring used items instead of new is another potential way to save money. Check out Craigslist, Facebook Marketplace, Mercari and Letgo, among other sites, or there’s Facebook Buy Nothing groups, where people give their neighbors items for free.

Then again, thrift stores have benefited from lockdown clutter cleanouts. Certified financial planner Barbara O’neill of Ocala, Fla,, volunteers at a local thrift store and recently scored a large, curved monitor for her husband’s computer.

“I picked it up for $10, and then got half off for being a volunteer,” said O’neill, author of “Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life.”

Lock in fixed rates

The Fed has so far resisted calls to raise interest rates to slow the economy and cool inflation. If that changes, variable-rate debt could cost more. If you have an adjustable rate mortgage and good credit, for example, it could make sense to refinance into a fixed-rate loan, O’neill said. For credit card debt, consolidating it with a personal loan could give you a fixed rate and level payments.

Inflation isn’t all bad

Those unaccustomed to rising prices may be surprised to discover that inflation has some advantages. It’s often easier to get a raise, because employers can pass along the cost in higher prices (although that can start to feed on itself, with higher prices triggering more demands for raises).

In addition, many tax rules and government benefits are influenced by the consumer price index, the nation’s official inflation measure. Social Security benefits include cost-of-living increases, so higher inflation can mean bigger checks. The amount you can contribute to retirement funds, including IRAS and 401(k)s, is also likely to rise.

“There are a lot of things that are tied to the CPI that can benefit some people and help them get a little bit higher income next year,” O’neill said.