How Colorado Residents Should Adjust Budgets Amid Record Inflation

Colorado — Inflation jumped 8.5 percent over the past year, hitting a 40-year high in March, according to a Labor Department report released Tuesday. This news creates more uncertainty for Colorado households that are already feeling the effects of rising costs and expenses.

This recent, steady rise in inflation can be attributed to several different factors, according to the Associated Press. These factors include a bottlenecked supply chain, increased consumer demand and global volatility in the food and energy markets made worse by Russia’s war in Ukraine.

Ryan Sweet, a senior economist with Moody Analytics, told CNBC in March that inflation costing Americans $296 more a month was “going to get worse before it gets better.”

In fact, Americans haven’t managed such high inflation since 1981, and the 1.2 percent increase in the consumer price index from February to March was the biggest month-to-month jump since 2005.

And with gas prices that have increased 48 percent over the past year and food costs up 10 percent, budgeting for inflation becomes even more important.

Estimates vary on how much extra money Colorado residents should build into their household budgets through the end of the year. Bloomberg News did the math, saying households should plan to spend $5,200 more this year, or $433 a month, for the same “consumption basket.”

Not all populations feel the same pain at the checkout counter and gas pump, or when they’re making out their rent checks.

Analyses by the Penn Wharton Budget Model and Wells Fargo showed low- and middle-income U.S. households are hurt the most by inflation. The Wells Fargo study, cited by CNBC, showed the middle class is being hit the most; and within that group, Hispanics and Latinos have the steepest jump in living costs.

There’s no way to know exactly how much prices will rise, though the Labor Department’s past consumer price index reports portend continued inflation.

One way to keep track of how much more you’re paying is through a Bureau of Labor Statistics inflation calculator. Say your monthly household budget was $4,982 in March 2021; a year later, you’d need $8,129.09 to pay the same bills.

“This is really harmful for people on fixed incomes,” Carol Ehlers, a human sciences specialist with the Iowa State University Extension and Outreach, said in a news release recommending the inflation calculator as an effective budget-building tool.

“Higher prices mean families need to be more strategic about their spending and find ways to stretch their income. Budgeting for periods of higher inflation challenges families to rethink the way they spend and determine which expenses they potentially can reduce or eliminate,” Ehlers said.

Analysts and others who spoke to CNBC offered some tips on keeping household budgets on track, including combining errands in one trip to save on gas, searching for apps and digital coupon sites, and canceling or renegotiating subscription services.

Also, experts said, it’s important to check the household budget weekly to see what costs are increasing the most and where budgets can be trimmed.