Inflation in Italy is soaring, as it is in many parts of the Western world. While the precise reasons for this are complex and varied, the ultimate fact that is unavoidable for millions of consumers is that rising prices are putting a serious strain on their lifestyles.
Climbing energy prices, for example, are already putting many people in Italy in the nightmare position of being forced to choose between paying their utility bills and putting food on the table for their families. Of course, Italians are highly resourceful people, with some businesses opting to turn out the lights and use candles to save money on their utilities!
Even so, understanding inflation and the best ways to fight it is one of the most useful things you could know in the contemporary world.
What Is Inflation?
Inflation is a process in the economic system in which the price of goods and services increases over time. As inflation increases, the ‘value’ of money falls which means that each Euro will buy less over time. This is referred to as a fall in the ‘purchasing power’ of a currency.
For example, if inflation increases by 10%, then a 10 Euro note will buy 10% less than it did before the inflation occurred. This puts a major strain on household budgets and has the effect of reducing the living standards for everyone.
Inflation In Italy – What Is The Government Doing?
Midway through 2022, inflation rates in Italy hit a 36-year high of nearly 8.5% in August. This increase exceeded even the most pessimistic predictions of most experts and has forced the Italian government to take action.
The Italian government has announced a 17.4 billion Euro package to help combat spiraling inflation in the country. The aid package is designed to assist households and businesses to combat the worst aspects of the skyrocketing utility bills and rapidly increasing consumer prices at the store. This measure was introduced by Mario Draghi, the outgoing Prime Minister of Italy, in a move that is hoped will bring relief to millions of people around the country.
The aid package is designed to help to cut gas, electricity and petrol prices for the lowest income families and struggling businesses in Italy. However, this extra 17.4 billion comes on the back of 35 billion Euros that have already been budgeted since January to combat inflation in Italy, and so not everyone is optimistic about its potential for long-term success.
Mario Draghi stated that he was prepared to ‘adopt further measures if needed’; and so it seems that even in government the confidence in the scheme is not absolute. Of course, it’s good that the Italian government is taking action but it’s also important for individuals to take steps to personally reduce the impact that inflation could have on their lives.
What Can You Do To Fight High Inflation In Italy?
Inflation, if left unchecked, can lead to people’s savings being wiped out and cause incredible levels of hardship in the short term. Fortunately, there are many ways that you can personally fight inflation and minimize the suffering and losses that you and your family may face.
Lowering Your Grocery Bill In Italy.
The rate of food inflation in Italy averaged around 2% between 1997 and 2022 but jumped to over 10% in August 2022! Food prices in Italy have been rising steadily throughout 2022, from a rate of 3.8% in January to 10.6% in August. This has left many Italians and Expats in the country facing difficult choices when it comes to doing their routine grocery shopping.
To reduce the impact that food inflation will have on you and your family there are a few practical tips that you can start to put into action today.
Create A Food Spending Plan.
Before you go shopping it’s a good idea to write a detailed list of everything that you need to buy. Then, when you’re in the supermarket, don’t buy anything you didn’t plan to buy! Of course, we can all be tempted to buy items on an impulse, but when you’re trying to keep the grocery bill down avoiding this habit can save a considerable amount of money.
Spend Money On More Cost-Effective Foods.
Not all food items are impacted equally by inflation. Generally, meats and fish tend to be most impacted by inflation so if you start to eat a more vegetarian diet you can avoid the worst of food inflation. You can also start to plan meals around low-cost food items such as pasta, rice or potatoes.
Another way to cut your grocery bills is to buy frozen fruits and vegetables because they are usually much cheaper than the fresh alternatives. You should also avoid buying branded foods and try sticking to the supermarket’s own brand or other lower-cost options.
Start Writing Meal Plans.
Saving money on your grocery bill doesn’t have to be a chore if you make it fun! For instance, you can start to write meal plans, research new, low-cost recipes and try more vegetarian dishes than you might otherwise. Creating a meal plan is a good way to help you budget your groceries each week and as you learn new recipes your repertoire in the kitchen will only improve.
Compare The Prices And Shop In Bulk.
Before you buy anything in a packet take a moment to quickly calculate how much it costs per 100 grams. You can then compare the item with other products to determine which is actually the cheapest per 100 grams. You should also consider buying non-perishable foods, such as pasta, sauces and frozen items in bulk so you can save money using the economies of scale.
Grow Your Own Food!
While it’s not possible for everyone in Italy, particularly in the cities, if you do have some spare space in your backyard then why not start growing some of your own food? Not only will you learn a valuable life skill but growing food is actually far easier than most people think it is.
Start with a few easy crops, such as potatoes or carrots, do a little research online to learn what you need to do and then get started! YouTube is a gold mine of videos that can teach you everything you need to know about growing your food. Alternatively, you can buy a backyard gardening book which you can keep on your shelf for reference whenever it’s needed.
Growing your own food is a real joy and it’s true what people say, it really does taste better! Also, if you have children, growing your own food is a fun, healthy and low-cost activity that you can all do together in the evenings.
Save Money On Your Transportation Costs.
Although petrol prices have remained relatively stable in Italy in recent years, hovering around 2 Euros per liter, you can still save a lot of money by taking public transport and minimizing unnecessary travel. Public transport in Italy is extremely extensive and relatively low cost. That means, provided you don’t live in a very rural part of the country, you can easily start taking the bus or train instead of driving your own car.
Italy has a very good railway network. In many routes, Italy has high speed trains or trains that make limited stops and local trains. The fares even in the high speed trains are not that expensive, yet I find a lot of Italians driving around. I feel it is because Italy has a driving culture just like that of the United States. There is nothing wrong with this. But this might not be the prudent thing to do in the current economic environment.
An alternative option for cities and towns is to start cycling instead of driving. Not only will you save money and fight inflation but you’ll also get fitter and more healthy. Of course, where possible, you can also choose to walk to the shops, a friend’s house or to work in the morning.
If you really want to save a considerable amount of money then you can even sell your car and save all that money on insurance, fuel and maintenance. Don’t forget, you always buy a car again once the economic situation in Italy improves.
Pay Off Credits Cards And Personal Debt.
As things get more expensive and you find yourself struggling to afford everyday essentials it can be tempting to use your credit card to cover the difference. However, in the long run, this can be a hugely destructive way to manage your finances.
If you already have a credit card or personal debt then it’s a great time to start making a serious effort to pay it down. Remember, that as inflation increases your credit card payments can become even more expensive. That’s why starting to pay off more than the minimum monthly repayments will quickly start to add up and cut your costs, leaving you in a better position to fight rising levels of inflation.
There are a couple of easy ways to help pay down your credit card and personal debts, which include:
- Create a comprehensive debt repayment strategy. You can get help with this if you make an appointment with a finance professional. There are also aggressive ways to rapidly pay off your credit card debt by tightening your belt in the short term.
- Consider consolidating all your debt into one loan. You can often reduce the overall interest you have to pay on your debts by consolidating all your debts into one loan. This will allow you to make a single monthly payment at a lower cost.
Plan A ‘Staycation’ This Year.
Europeans love vacations. During the month of August, the entire continent goes on vacation. Americans also love vacations, but most Americans get only 10 vacation days in a year plus a few personal and sick days. But a growing number of Americans are like me, people who get paid by the hour, without any benefits. If I take a vacation or sick day, I don’t get paid.
A log of people in Italy get about 30 days off in a year. A great way to fight inflation is to take a ‘staycation’ this year instead of traveling. A ‘staycation’ is a vacation that you take in your own country or region. Italy is a beautiful place with a huge amount to see and do; so, if you’re an Expat then why not plan a trip within Italy instead of traveling back to the US or another foreign country?
Booking a couple of weeks’ vacation in Italy is a wonderful way to get to know the country and will save you money on air tickets and hotels abroad. There are many rural parts of Italy where you can enjoy a very low-cost vacation in some of the most spectacular scenery in the world, right on your doorstep.
Maximize Your Income From Your Existing Savings.
One of the biggest problems for consumers during periods of rising inflation is that the value of their savings is quickly eroded. An extreme example of this occurred in the Weimar Republic of Germany in the early 1920s. Over the course of only a few years, the monthly rate of inflation in the Weimar Republic actually reached almost 30,000% in 1923! This completely wiped out the savings of the average citizen and led to huge social unrest that ultimately contributed to the rise of the Nazi party.
Fortunately, the experts are not predicting that inflation in Italy, or Europe, will reach those kinds of levels although it’s still an illuminating illustration of the potential dangers of unchecked inflation. To reduce your losses from rising levels of inflation you should certainly consider moving your money into secure long-term saving options, such as Government Treasury Bonds. These are backed by the government and are generally more secure than other private savings options.
Treasury Bonds are not, however, a good option for short-term household savings accounts. Instead, you may want to consider moving your savings into a high-yield account which may have certain restrictions on how much money you can take out each month but will give you better yields than a standard bank account will.
Diversify Your Portfolio.
If you have an investment portfolio then times of recession and rising inflation are an ideal opportunity to diversify. Not only can you pick up some incredible bargains on property but you can secure your holdings against potential future economic shocks. By diversifying your portfolio you can spread your risks over a wider range of assets and avoid keeping all of your eggs in one basket.
Diversifying your portfolio is one of the best ways to combat inflation and maintain the value of your savings over time.
If you’re planning to diversify your assets and savings then it’s always worth seeking the advice and guidance of a tax and finance specialist. They will be able to point out any tax loopholes that you can take advantage of in Italy and give you detailed breakdowns of the potential earnings from a wide range of asset classes.
There Are Ways You Can Overcome Inflation.
Inflation can have a devastating impact on the quality of your life and even reduce your hard-earned savings. However, with forethought and good discipline, you can easily avoid the worst effects of inflation while keeping you and your family safe and secure.
