How to Deal With Rising Prices and Interest Rates

As the cost of purchases and debt climbs, try these tips to cut spending in some key budget areas.

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Consumers face rising prices almost everywhere they turn, including on basics like gas and food. At the same time, rising interest rates can translate into higher credit card payments for people carrying debt month to month.

That double whammy of higher costs for both everyday spending and debt translates into greater financial strain on people’s budgets. While there’s not much consumers can do to change those macroeconomic factors, they can compensate for them by finding new ways to save across some popular spending categories.

“It’s more important now than ever to audit your finances and be intentional about your spending,” says Andrea Woroch, a consumer finance expert based in Bakersfield, California. “It could be an opportunity to cut wasteful spending out of your budget in a way that won’t cause you to make bigger sacrifices.”

Here are five strategies that can help.

Trim gas expenses through smarter driving

You can drive less, and spend less on gas as a result, by carpooling, grouping errands together and using apps to plan the most efficient route, says Barbara O’Neill, owner and chief executive of Money Talk, a financial education company based in Ocala, Florida. She suggests using an app like Wanderlog to create an efficient path from point A to point B, especially for long car trips.

O’Neill says it’s worthwhile to plan where you'll buy gas in advance, based on the lowest prices. “Prices vary by state but also within the same area,” she says, and apps like Waze and GasBuddy can help. Paying with cash can also generate savings, because many gas stations charge less for cash transactions, she adds. If you would rather use a card, gas rewards credit cards can help you earn additional points or cash back.

Taking care of your car by checking the tire pressure and keeping it up to date with inspections helps it run more efficiently, says Ellen Edmonds, spokesperson for AAA. “Under-inflated tires decrease fuel economy by 5%,” she says. She also recommends aiming to drive at 50 miles per hour whenever possible, because fuel economy peaks at that speed.

Edmonds cautions against idling for more than 10 seconds: “It might seem counterintuitive, but turning the car off then turning it back on if you’re idling for more than 10 seconds will save gas.” Car engines consume a quarter- to a half-gallon per hour of idling, she explains.

Stretch your grocery budget

Woroch says the simplest way to spend less at the grocery store is by cutting impulse purchases, “whether it’s buying an extra bag of chips or something else you don’t need." She notes that shopping online can help you stick to your list and save, even after factoring in the delivery fee, if it means you avoid grabbing extras or things that might go to waste. If you do go to the store, she says, “grab a handbasket, because you can’t put anything in other than what you need.”

Earning cash back through credit card rewards or other loyalty programs also helps take the sting out of rising prices, Woroch says. She recommends using CouponCabin to find cash-back deals across a variety of stores.

Slash variable spending on entertainment

O’Neill says that finding free, fun activities starts with signing up for alerts on Eventbrite, an event management system that showcases local events, some of which are free or inexpensive, as well as following your town’s Facebook page or Twitter feed. “Then you’ll get alerts about events going on in your community,” she says.

If you have a warehouse membership to a store like Costco or Sam’s Club, Woroch recommends purchasing gift cards at a discount for restaurants, movie theaters, theme parks and other entertainment venues if you planned to spend money at those places anyway. And as with grocery and gas spending, using credit cards that offer bonus rewards or cash back for entertainment spending can help you accrue additional points or cash back.

Build more savings in a high-yield account

High-yield online savings accounts are often the first to respond to interest rate increases by the Federal Reserve, which means your money can start earning more in those accounts. “You’re missing out on free money if you leave your money in a traditional bank, so take advantage of those high-yield savings accounts,” Woroch says.

Pay off high-interest debt

Lastly, rising interest rates mean that credit card debt will become more expensive, which makes paying it off as soon as possible a savvy move. Debt paydown can be tough when you’re also paying more for everything; you might consider finding ways to make more money temporarily.

Then, once it’s finally paid off, “you can turn those debt payments into savings payments and boost your savings accounts,” Woroch says. That approach allows you to take advantage of the rising rates instead of falling victim to them.

Before you build a budget
NerdWallet breaks down your spending and shows you ways to save.