How New York Residents Should Adjust Budgets Amid Record Inflation

NEW YORK — Inflation hit a 40-year high in March, hitting many New Yorker's wallets hard. It jumped 8.5 percent over the past year, according to a new report from the Labor Department. It means many New York households are going to have to figure out how to save even more as the costs of necessities continues to rise.

Inflation has been steadily rising for months for a variety of reasons, ranging from a bottlenecked supply chain and increased consumer demand to volatility in global food and energy markets worsened by Russia’s war in Ukraine, The Associated Press reported.

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 evermore important.

Estimates vary on how much extra money New York 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.”

According to the Bureau of Labor Statistics, prices in New York are up across the board. From February to March, prices for food rose 0.7 percent, and home energy costs are up 5.8 percent. The price of clothing is up 2.8 percent month-to-month, and gasoline was up 18.1 percent.

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.