How Households Can Cut Costs And Save Money During Inflation

As rising fuel prices and household expenses squeeze monthly budgets, many families are looking for ways to spend less without disrupting their lives. The instinct to cut costs is sound, but the choices made during such periods can either stabilise a household’s finances or quietly make things worse.

Review Where Your Money Goes Each Month

Reviewing all subscriptions, memberships, and auto-debits is a practical first step. “Most families are surprised to discover they are spending Rs 2,000-5,000 every month on services they rarely use,” says Prashant Mishra, founder and CEO of Agnam Advisor.

Simple changes, such as combining errands, carpooling, or using public transport for shorter trips can reduce fuel costs without affecting your lifestyle. Mishra also recommends saving and investing at the start of the month rather than the end, since waiting to set aside what is left over usually means very little gets saved.

Mistakes That Can Worsen Your Financial Position

Some cost-cutting moves can do more harm than good. Reducing insurance cover is one of them, as skipping a health insurance top-up or lowering life insurance protection may save a few thousand rupees today but likely create a much larger financial problem later.

Pausing the systematic investment plans (SIPs) when expenses rise is another common error, as is ignoring expensive debt. “If you are paying high interest on a credit card or personal loan, clearing that debt should be a priority before worrying about minor monthly expenses,” says Mishra.

What A Financial Health Check Should Look At

When assessing a household’s financial health, equated monthly instalments (EMIs) come first. “If debt repayments are consuming more than 40 per cent of take-home pay, the household becomes vulnerable to even a small disruption in income,” says Mishra.

An emergency fund, ideally six months of expenses in a liquid and easily accessible form, is equally critical. Savings tied up in fixed deposits, Public Provident Fund (PPF), or property are not always accessible when money is needed urgently, he says. He says the distinction on spending clarity is “the starting point for every effective budget”, referring to the difference between essential and lifestyle expenses.

Habits That Can Help Over the Next Year

Locking in costs where possible makes sense. Annual subscriptions tend to be cheaper than monthly ones, and buying regularly used non-perishable items in bulk can blunt the impact of rising prices. Mishra also recommends putting money towards things that reduce long-term costs, such as energy-efficient appliances, quality cookware, or a reliable vehicle.

He advises families to raise their monthly investments by 5-10 per cent each year as incomes grow. “Families that navigate inflation best are not necessarily the ones that spend the least, but the ones that spend thoughtfully and continue investing consistently,” he says.