How to Save Money as Consumer Prices Keep Rising

Inflation jumped 8.5 percent in July, making cost-cutting more important than ever

Inflating dollar sign balloon with tire pump Illustration: Getty Images

Consumers are still being hammered by rising prices, although there are small signs of easing. Inflation soared at an 8.5 percent annual rate in July, down slightly from the previous month, but still close to a 40-year high.

Despite the bad news, there are still ways to lessen the burden on your wallet. And in an encouraging development, the prices for gas and energy have started to come down.

Even so, the inflation numbers continue to be alarming. The 8.5 percent rise in the nation’s main inflation gauge, the Consumer Price Index (CPI), was led by steeper costs for food and shelter.

That was only a bit below the 9.1 percent rate in June, and by comparison, still far surpasses the average inflation rate of just 1.4 percent nearly two years ago.

More on Ways to Save

Energy prices have risen 32.6 percent over the past 12 months, although they dropped 4.6 percent in July. Food prices, meanwhile, jumped 10.9 percent year over year, "the largest 12-month increase since the period ending May 1979,” according to a news release on Wednesday from the Bureau of Labor Statistics.

But even taking out volatile food and energy prices, the so-called core inflation rate was up 5.9 percent over the past 12 months, unchanged from June.

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-19-related bottlenecks in the supply chain, and, more recently, the impact of war in Ukraine on energy supplies.

Consumers have been feeling the effects. In July a nationally representative survey by Consumer Reports of more than 2,000 U.S. adults found that 97 percent were concerned about rising prices due to inflation, with nearly two-thirds reporting they were very or extremely concerned.

Nearly all those surveyed (98 percent) were also worried about prices continuing to rise, and 97 percent were concerned about the possibility of an economic recession in the U.S. in the next six months.

Some forecasters have been hopeful that inflation may be nearing a peak, but this month’s number suggests that further Federal Reserve rate hikes may be needed to slow the price increases.

"Falling gas prices and signs of easing of supply chains do suggest the peak for inflation is near," says Andrew Patterson, senior international economist at Vanguard. "But rising home prices and rents are likely to maintain some upward pressure on prices over the next several months, and we believe it will take until at least 2024 for the Fed to get back to their 2 percent target."

Even if the inflation rate continues to decline, that won’t mean consumers will see falling prices anytime soon, says Stephen Cecchetti, professor of international finance at Brandeis University. That’s because the rise in prices due to inflation does not reverse as the rate of increase slows.

"Just ask your parents or grandparents what prices they used to pay for things," says Cecchetti.

For shoppers, these higher prices 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 reflects steep increases in all major food categories, with the cost of meat, poultry, fish and eggs up 10.9 percent over the past 12 months, while cereal and cereal products were up 16.8 percent.

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

In a sharp turnaround, retail gasoline prices fell 7.7 percent in July, following an 11.2 percent increase in June. Over the past 12 months, gasoline prices have risen 44 percent.

Drivers are continuing to see declining prices. AAA data shows that gas prices fell to $4.01 per gallon as of August 10, down from a high of $5.02 in June.

That decline reflects a recent dip in oil prices, which have fallen on concerns over slowing economic growth. Improved U.S. oil production has also helped put a lid on gas prices. 

Still, given the continued war in Ukraine as well as other uncertainties, gas prices are likely to remain volatile.

“Whether there’s a hurricane in the Gulf or some other disruption, gas prices could turn around on a moment’s notice,” says Patrick De Haan, head of petroleum analysis at GasBuddy, a website and an app that help drivers find the best deal.

But you can make the most of our strategies to cut your 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

Costs for major appliances dipped 2.2 percent overall in July, following a 7.5 percent increase the previous month. 

A key reason: Some major retailers misjudged 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 pushing savings deals for consumers who bundle a number of products to purchase, Carter says. This means that those planning to upgrade their kitchens with a new refrigerator, dishwasher, and cooking range, for example, could score even deeper discounts.

But 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. Consider opting for basic stainless steel—a popular finish that’s 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 10.4 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 6.6 percent.

That doesn’t mean you can’t find an affordable option, because prices for 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," Fisher says.

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.

Telecom and Internet Services

During the pandemic, consumers had a bit of a break because prices for telephone and wireless services rose only slightly.

But prices have fluctuated more recently, with internet service costs rising 1.7 percent over the past 12 months, and residential phone service rising 3.4 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 have enjoyed lower TV prices over the past 12 months, with costs dropping 14.6 percent. And the latest numbers show prices dipped 0.2 percent.

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 August, for instance, you can find sales in 11 product categories, including vacuums, grills, and laptops.

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

Editor’s Note: This article has been updated with the latest government inflation numbers.