How to save money as consumer prices keep rising

Inflation continues to batter consumers, but there are still ways to lessen the bite

Twenty dollar bills. (Pexels)

Consumers continue to be hammered by rising prices, with the latest inflation data showing the biggest monthly increase in over 40 years.

Despite the bad news, there are still ways to lessen the burden on your wallet. And in one encouraging development, the price of some appliances is starting to come down as retailers confront a glut of unsold merchandise. See below for details.

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Overall, however, the inflation numbers continue to be alarming. The nation’s main inflation gauge, the Consumer Price Index (CPI) soared at an 8.6 percent annual rate in May, the government reported Friday, led by steeper costs for food, shelter, and new cars.

That surpasses the most recent high of 8.5 percent in April, and by comparison, an average inflation rate of just 1.4 percent nearly two years ago.

Energy costs continued to surge last month, rising 34.6 percent over the past 12 months, a 3.9 percent increase from April, while food prices jumped 10.1 percent year over year.

“The increase was broad based, with the indexes for shelter, gasoline, and food being the largest contributors,” according to the Bureau of Labor Statistics news release.

But even taking out volatile food and energy prices, the so-called core inflation rate was up 6 percent over the past 12 months.

Prices have jumped in the past year due to a number of factors, including billions of dollars in government stimulus spending, sharply higher consumer demand, COVID-related bottlenecks in the supply chain, and, more recently, the impact of war in Ukraine on energy supplies.

Consumers have been feeling the effects for months. Last October a nationally representative survey by Consumer Reports (PDF) of more than 2,000 U.S. adults found that 92 percent had seen higher prices when shopping for gas, with more than 6 out of 10 saying the increases were large.

More than 80 percent of those shopping for groceries say prices have gone up, with 53 percent reporting large increases.

Some forecasters have been hopeful that inflation may be reaching a peak and could drop over the coming year, but last month’s increase suggests that easing may be further off.

For shoppers, these larger price tags still require careful planning, and perhaps a budget overhaul.

“Maintaining a cash reserve can be helpful if larger bills or unexpected expenses come in,” says Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York City. “Keeping track of your cash flow is helpful in navigating any financial environment.”

Here’s what to look for in several key spending categories, with tips for reining in your costs.

Food

The surge in food prices reflected a steep increase in the costs for meat, poultry, fish, and eggs, which rose 14.2 percent over the past year.

To help keep your food budget under control, take full advantage of any promotions to stock up your freezer and pantry.

You can also save significantly by sticking with warehouse clubs and discount stores, such as Costco and Trader Joe’s, as well as private-label brands, says Burt Flickinger III, managing director at Strategic Resource Group, a retailing consulting company.

Another strategy is to scout for food bargains at drugstores and convenience stores. Some outlets are expanding their variety of fresh foods and may offer lower prices than traditional stores.

Energy

Retail gasoline prices soared 4.1 in May, after falling 6.1 percent in April. In the past 12 months, gasoline prices have risen 48.7 percent.

Prices have been driven higher by surging demand, while U.S. production hasn’t recovered fully from sharp cutbacks during the Covid pandemic. Other factors include supply chain bottlenecks, as well as disruptions from the war in Ukraine.

Gas prices have been spiking again, recently hitting a new high of $4.99 per gallon, according to AAA.

“Gas prices are likely to remain volatile through the summer, but they are likely to fall by the end of the year,” says Patrick De Haan, head of petroleum analysis at GasBuddy, a website and an app that help drivers find the best deals.

Meanwhile, you can make the most of options to cut those costs. You can find tips in CR’s articles on saving money at the gas pump and buying cheaper fuel at warehouse clubs.

And if you’re planning a summer road trip, try to fill up in states with lower gas taxes.

“If you check gas prices ahead of time to find lower-cost options, you could save $5 to $10 a tank,” De Haan says.

You can also squeeze more mileage out of your tank of gas by driving evenly, sticking to speed limits, and removing your roof rack, which can create drag.

Major Appliances

Prices for major appliances have remained stubbornly high during the past two years, but that has started to ease.

Recent quarterly reports from Walmart and Target indicate that the two retailers misjudged sagging consumer demand for big-ticket items, leaving them with an unexpected glut of merchandise they now need to move.

Recent advertisements from a number of major retailers are showing big discounts for major appliances, including refrigerators, says Jordan Carter, an associate analyst for GAP Intelligence, which tracks prices for a variety of product categories at retailers across the country.

In particular, retailers are especially pushing savings when consumers bundle a number of products in their purchase, says Carter. This means those planning to upgrade their kitchens with a new refrigerator, dishwasher, and cooking range, for example, could score even deeper discounts.

However, discounts won’t be available across the board on all brands and at all retailers, and consumers will have to make sure to compare prices carefully and be sure to comparison shop at independent retailers, too. They may offer comparable bargains and perhaps better service.

For additional savings, before you shop, make sure you know which appliance features you must have vs. those that are less essential, says Nish Suvarnakar, senior market analyst for Consumer Reports. And consider opting for basic stainless steel—a popular finish that is widely available—rather than a specialty finish. And finally, consider substitutions if your first-choice model is unavailable.

Cars

Prices for new cars and trucks are up 12.6 percent over the past year, driven by pandemic-related parts shortages and even factory shutdowns, as well as a scarcity of computer chips. Used-vehicle prices have climbed 16.1 percent.

That doesn’t mean you can’t find an affordable option, because prices of individual models vary widely. Take a look at our articles “How to Buy a Used Car” and “How to Navigate Surging Used-Car Prices.”

But given the shortage of available cars, consumers should manage their expectations, although a few models do still have traditional incentives available.

“In today’s market, shoppers should be looking for a fair price, rather than a great deal,” says Jeff Bartlett, cars managing editor at Consumer Reports. “Big discounts are a distant memory.”

With so few vehicles on dealership lots, the balance of supply and demand favors the seller.

“There is one silver lining for new-car buyers: If you have a car to trade-in, increased used-car values have made it worth more than you might think,” says Jake Fisher, senior director of auto testing at Consumer Reports. But consumers need to be aware that although they may get a higher-than-expected value on a trade-in car, those gains may be erased by the higher price for a replacement.

If you need a cash infusion, the sweet-spot is selling a used car that doesn’t need to be replaced.

“If you have an extra car that you might not need, there’s never been a better time to sell it. A late-model used car in good condition might get a price similar to what it cost when it was new,” says Fisher.

For a useful benchmark on car costs, check out CR’s Build & Buy Car Buying Service and online research tool, which allows shoppers to check the current transaction prices for different models. You may find that the best way to get the car you want is to order it or buy it from another state.

And to avoid breaking your budget, check out CR’s advice on the best new-car deals, as well as our recommendations for fuel-efficient SUVs and affordable used cars you can buy right now.

Break Up With Your Bank

With rising inflation, interest rates are also going up, so moving money to a digital bank that offers savings and checking accounts with higher APY rates could help pad your savings.

“The highest savings rate I’m seeing right now is 1.26 percent from TAB Bank,” says Ted Rossman, a senior industry analyst at Bankrate.com. “I think there’s a good chance the top-yielding savings accounts will be at least 2 percent by the end of the year. "

Those rates are a strong incentive to shop around, since the big brick-and-mortar banks are unlikely to increase their rates much—if at all—Rossman says.

“Everyone needs liquid savings, so getting the highest yield possible is a nice bonus. Two percent of $10,000 would be $200 over the course of a year. Totally federally insured money you have sitting around anyway,” he says.

Telecom and Internet Services

Earlier in the pandemic, telecom consumers had a bit of a break, with prices for telephone and wireless services rising only slightly, while some providers suspended data caps and provided other consumer breaks.

Some providers have started to raise prices and impose data caps once again, with internet service costs up 1.7 percent over the past 12 months, and residential phone service up 6 percent.

To keep a lid on those costs, consider switching to a lower-cost cell phone plan, perhaps one from your internet provider. Lower-income families may qualify for a federal program that helps with internet bills, called the Affordable Connectivity Program.

And although prices are also rising for streaming services, you can still trim your costs by cutting the TV cable cord.

You also might try haggling with your provider. As a recent CR survey of our members found, many have been able to lower their bills by negotiating with their cable or internet company.

Televisions

Consumers enjoyed a break on TV prices over the past 12 months, with costs dropping 5.8 percent. And the latest numbers show prices dipped 2.2 percent.

Generally, the best time to buy TVs tends to be between fall and early winter, when holiday sales begin and the release of new models in January happens, says Samantha Gordon, deals editor at Consumer Reports.

But if you shop around, you can still find affordably priced TVs, such as these bargain 70-inch screens.

Consumer Reports members can get more details about finding the best TV for your money in CR’s TV buying guide.

Smart Shopping

There are plenty of other ways to save money, and Consumer Reports can help.

For instance, we’ve found that some laundry products—washers, dryers, and detergents—waste money. So here are some tips to avoid them.

We also have a CR Deals site, which lists sales on products we recommend, as well as a monthly column on products that are on deep discount. In May, for instance, you can find sales in 21 product categories, including grills, fitness trackers, and mattresses.

And Consumer Reports members can find out when to buy a whole array of products by using CR’s Best Time to Buy guide.