How Illinois Residents Should Adjust Budgets Amid Record Inflation

ILLINOIS — With inflation hitting a new, 40-year high in March, Illinois residents are feeling the pinch as costs for many necessities continue to rise. The latest numbers, released by the Labor Department Tuesday, signify an 8.5 percent jump nationwide over the previous 12 months.

In the Chicago-Naperville-Elgin area, energy prices increased 33.7 percent, largely the result of an increase in gasoline prices. Food prices rose 9.4 percent, as measured by the Consumer Price Index for All Urban Consumers

The reasons for the increase vary, but inflation has been steadily rising for a while. Economists blame a bottle-necked supply chain, coupled with increased consumer demand and the continued volatility in global food and energy markets worsened by Russia’s war in Ukraine, according to The Associated Press.

"[It's] going to get worse before it gets better," Ryan Sweet, a senior economist with Moody Analytics, told CNBC in March, with inflation currently costing Americans $296 more a month.

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 evermore important.

Estimates vary on how much extra money Illinois 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.”

Prices in the Chicago-Naperville-Elgin area were up 1.4 percent over the past month and up 7.8 percent from a year ago, as measured by the CPI-U. Regional Commissioner Jason Palmer said the food index increased 1.4 percent, and the energy index rose 12.0 percent in March.

The all items less food and energy index advanced 0.3 percent. Within the all items less food and energy category, prices were higher over the month for household furnishings and operations and new vehicles.

Overall, in the Midwest Region, area prices were up 1.3 percent over the past month, which is an increase of 8.6 percent from a year ago. According to the CPI-U, higher prices for gasoline were the largest contributing factor to the March increase.

The food index rose in March due to higher costs for food at home, and the index for all items less food and energy increased as a result of higher shelter costs.

The Midwest region comprises Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

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.