Cheapflation Station

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An increase in the cost of groceries and essentials from inflation can be deflating.

Inflation, shrinkflation, and cheapflation sound like really terrible skin diseases, but they are actually even worse. These days, everyone has a “-flation” that is making their life more difficult, but cheapflation affects everyone because it targets low-priced goods and essential items.

This financial phenomenon occurs when lower-priced goods increase in price faster than more expensive items. It affects the brands we buy and the places we shop, and it affects lower-income households more than others.

Overall inflation increased to 2.9% in December 2024, moving further from the Fed's target of 2%.

Let’s look into how you can best protect yourself — a “cheapflation vaccination,” if you will.

Facts on Inflation

Although I am sure everyone is desperate for prices to return to normal, those who know are saying it could continue into 2026.

Overall inflation increased to 2.9% in December 2024, moving further from the Fed's target of 2%. 

Average prices are up 22.5% from before the pandemic in February 2020 - meaning items that would have cost $1,000 in 2020 now cost $1,225.

I don’t know about you, but just reading these numbers makes me nauseous.

I am the Egg Man

A list of the goods that increased the most in the year before December shows cleapflation in action and why people have found themselves drinking Dr. Proper and Mountain Juice to save a few dollars.

According to the Bureau of Labor Statistics, the top 10 items that have increased in price since the pandemic are:

Conversely, the top 10 items that have decreased in price include technology and goods that are non-essential and are traditionally more expensive:

The ongoing increases in gasoline and heating oil, which were up around 4.5% in the final two months of 2024, are contributing to the increase in inflation. 

It feels like things are getting more expensive, but we’re hearing otherwise. That’s because the prices of most things you buy, most often, have been going up. Just not the most expensive things you rarely buy, like smartphones, TVs or computers.

Inflation Index

Aldi’s Nutz

Off-brand is on-brand in this era of cheapflation. Aldi is a German discount supermarket, born in the hyperinflation of the post-WWII era and renowned annually for consistently having the lowest prices in the industry. 

2024 was a very successful year for the brand. Last year, it saw 50 million customers in its stores, 39% of whom were brand new to the brand. I am one of those new customers, and I have to say, Mama Cosi (whoever that is) puts together a nice and cheap frozen pizza.  

Walmart saw massive growth this year, with 75% of its revenue coming from households making more than $100,000. Fueled by bargain shopping, adding higher-income households bolsters Walmart’s core demographic of… basically everyone else. 

The need for goods at a lower price and the convenience of subscription delivery services is driving the growth and, until prices drop and even after they do, most of these new customers.

Dolla’ Dolla’ Bill

Another side effect of cheapflation is the proliferation of dollar stores. Prevalent in rural areas with few other grocery options, these chains come in, undercut prices, and provide smaller portioned lower-quality food products.

Shoppers think they are getting a better deal, but they are actually making their circumstances worse by trying to save money on groceries.

Side note: For some reason, my kids LOVE the dollar store, and it is definitely a savings-hack to take them there to buy a cross-eyed Barbie and some bootleg LEGOs instead of more expensive toys that aren’t basically garbage.

How do you manage your budget to ride the waves of inflation?

Bolster Your Budget

Inflation will continue to beat down the castle door of your Fortress of Finances, so we suggest the following strategies to manage your budget during uncertain fluctuations.

1) Prioritize Your Most Important Expenses

Add your rent/mortgage and auto loan costs, then subtract them from your monthly take-home income. Some suggest a zero-based income, where your income minus your monthly expenses equals zero. Others suggest the 50/30/20 method, where 50% goes to necessary expenses, 30% to discretionary, and 20% to savings or debt repayment.  

2) Cut Costs

This can be done in any number of ways. Since groceries are going up in price the most, you should keep a decent inventory of what you have at home and only backfill essential items when needed. 

For your utilities, you can lower costs by using efficiency modes on your dishwasher or washing machine to consume less water, changing out your air filters regularly, and installing LED lights. You can also run around the house turning lights off after everyone leaves a room, as I do in my home.

And all the fun stuff you actually make money to do, like shop and eat out, should be kept to an absolute minimum.

3) Pay Off Debt

You should begin paying off the credit cards with the highest interest rates first. This is called the Debt Avalanche Method. It’s the most efficient. As you reduce your monthly debt costs, you continue to roll those savings focus-fire into your debts.

You need to take your foot off the brakes before you focus on pressing the gas.

Time traveler alert: In an upcoming newsletter, we will discuss one of the quickest ways to pay off debt and fight high interest rates.

Invest in Inflation

If the price of eggs can inflate, why can’t your investments?

One way to protect yourself against inflation is to invest in asset classes that outperform the market in less-than-ideal climates.

Gold Again?

When we first started this newsletter, we talked about everyone’s sexiest metal, gold, and how it is a popular investment during times of inflation and economic uncertainty. Being a physical asset as well as a form of “alternative currency” makes it a great way to fight against surging interest rates

The Real (Estate) World

During times of financial hardship, rising prices mean rising property values. If you own real estate and rent it out, you can increase rent to help cover the rising costs of other goods, increasing your income when goods and services are at their maximum level.

S&P is For Me

ETFs like the S&P 500, which aggregate investment in businesses in the technology and communication sector, are very smart to invest in generally since their average yearly return of about 9% is a great way to grow your wealth without much risk.

This type of expected return outpaces the overall inflation rate, which, if you remember, is 2.9% as of December 2024.

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“Inflation is when you pay fifteen dollars for the ten-dollar haircut you got for five dollars when you had hair”

— Sam Ewing

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Money Talks

What is the one item you purchase that feels like it has gotten the most expensive to you?

Let us know so we can share your answers in a future newsletter!

May the cash flow always be in your favor,

Andrew and Lou - the Funny Money team