Mar 16, 2025
When Americans found themselves flush with stimulus funds in 2021, they were more than happy to go out and spend that money. And that’s what lawmakers wanted — the purpose of sending out stimulus checks back then was to boost the economy and help it recover from the dire events of the COVID-19 pandemic.
But there was just one problem. Supply chain bottlenecks came to a head just as Americans found themselves with extra money to spend. That led to a wide gap between supply and demand, and that’s a textbook formula for rampant inflation.
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In July of 2022, inflation — as measured by the Consumer Price Index — peaked at 9.1%. It has since, thankfully, crept downward as supply caught up to consumer demand.
But even as recently as January, 2025, inflation was still being measured at 3%. That’s a full percentage point above the Fed’s preferred 2% target inflation rate.
Not surprisingly, many Americans are feeling the strain of inflation and are seeing their living costs go up. A recent Pew Research survey found that 63% of Americans think inflation is a very big problem. Meanwhile, a 2024 Primerica survey found that inflation remains the top concern for middle-income Americans, with more than 40% citing it as a major worry.
If inflation is stressing you out, it’s important to fight back. Here are some steps you can take.
Prioritize your spending
A February, 2025, Wells Fargo study found that 76% of Americans are cutting back on spending — a decision fueled by persistent inflation.
If inflation is wreaking havoc on your budget, you may want to make cuts as well. But rather than slash your spending at random, prioritize your spending so your money is used to buy the things that are most important to you.
Obviously, you have to pay your rent, cover your car payments and put food on the table. But in the context of your discretionary budget, think about the things you’re spending money on and decide which add the most value to your life.
If your weekly outing with friends is more important than your gym membership and streaming services, keep the social plans and ditch the other two bills.
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Boost your income with a side job
In 2022, 29% of Americans with a second job said inflation was a factor in their decision to take on a side hustle, reports Side Hustle Nation.
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If you’re having a hard time keeping up with rising living costs, it could pay to pick up some more work on top of your main job. But you may not want to pick up any old side hustle. Instead, do your research to find a gig that’s worth your time.
And also, be mindful of your schedule so that you don’t get burned out. If your main job comes with unpredictable hours, a more flexible side gig may be best, such as driving for a rideshare or food delivery service.
Invest your money in inflation-beating assets
Inflation is bound to be a problem for a lot of Americans in the near term, but what you may not realize is that inflation is something you need to plan for now in the context of your retirement.
You may be steadily contributing money to an IRA or 401(k) plan today, which is great. But if you’re not investing your money in assets that can beat inflation, you risk ending up with a retirement shortfall, as $1 today won’t have nearly as much buying power in 20 or 30 years.
A 2024 Allianz Life survey found that 63% of Americans worry more about running out of money in retirement than dying, and 43% say that high levels of inflation are contributing to that fear. But if you invest your long-term savings in individual stocks or S&P 500 ETFs, your portfolio might grow at a fast enough pace to beat inflation.
And while the Federal Reserve may target an annual inflation rate of 2%, that doesn’t mean we’re due for a decades-long period of 2% inflation every year. But chances are, once this current stretch of heightened inflation cools off, we’ll get closer to that mark and hopefully stay there for a good number of years.
Meanwhile, over roughly the past century, the stock market has rewarded investors with an average annual return of around 10%. And while past performance doesn’t guarantee anything for the future, it’s fair to assume that over time, stocks have the power to outpace inflation, setting you up for a more secure future once retirement rolls around.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
