Whip Inflation Now, Before It Whips You

Still, with gasoline rolling past $4 per gallon and utility bills skyrocketing, it's enough to give you a heatstroke. We might not get to double-digit inflation, but the rate of inflation is hurting families already struggling to make ends meet.

So what does a family do when they've been setting aside, say, $100 a month for gas and now it costs $200 or $300 a month? What do you do if you've budgeted $500 for food for your family of four, and now that expense has increased by 20 or 30 percent?

How can you budget when prices keep rising, but your income is flat or declining?

If you haven't already moved toward becoming more energy efficient, you won't make your budget work in an inflationary environment.

Drive slower. Use less of your air conditioner. Walk through your home and see what you can do to make it more energy efficient. I started charging my kids $1 every time a light was left on after they exited a room. They've become much better at energy conservation since it began costing them money.

Start shopping smarter by switching to store-brand grocery items. When I bought some off-brand soda, my oldest, Olivia, did rag on me for days. But, hey, it was 69 cents for 2 liters. If the kids don't like the store-brand soda they can drink water, which is better for them anyway.

Bend down. Often the less costly items are on the lower store shelves.

If you're worried about inflation eroding the buying power of your investment dollars, consider putting some (not all) in two inflation-indexed securities offered by the U.S. Treasury: Treasury Inflation-Protected Securities (TIPS) and I Bonds. Both are designed for investors who want inflation protection and a guaranteed rate of return on their principal. With TIPS, the principal and interest payments are adjusted to compensate for changes in inflation. The earnings rate on an I Bond is a combination of a fixed interest rate plus the rate of inflation. You can buy TIPS and I Bonds from financial institutions and at http://www.treasurydirect.gov.

I know the economic whipsaw we're in is so frustrating. We have to worry about a recession. And now we have to be concerned about escalating prices leading to budget-busting inflation.

But you have to do more then fret. The key to beat inflation is to do what Bernanke says. You have to be flexible with your finances. You have to act. Stop talking about cutting costs and do it -- now.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

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