Inflation has been a hot topic this year and is affecting millions of Americans.

If your money isn’t stretching as far as it used to, you’re in good company. We are all feeling pressure at the pump, in the grocery check-out line, and in our capacity for savings.

Inflation is a normal part of the U.S. economy, and although it ebbs and flows, it will always be a factor in your financial situation. We must accept and account for inflation as part of a financial plan, but there are things you can do—or more accurately, not do—to limit its long-term effects. 

When inflation is high, avoid these common financial mistakes. 

• Don’t operate on an outdated budget. When costs increase, line items in your budget should be adjusted to reflect reality. It can be helpful to use ranges instead of exact amounts and be sure to prioritize essential expenses first. For categories that fluctuate, estimate high, and add a contingency category as a buffer if possible.
• Don’t eat away at your emergency funds. It’s a mistake to drain your savings to cover today’s higher bills or to maintain your pre-inflation lifestyle. Emergency funds have an important purpose: to help you handle necessary but unexpected costs without sidetracking your financial plan. Car repairs or medical bills cannot always be planned, and it’s best to reserve emergency funds for truly emergent purposes.
• Don’t expect cash savings to keep up with inflation. It’s not unusual for people to want more cash on hand in times of high inflation. However, sitting on the investing sidelines can prevent you from keeping pace with rising costs. Keeping assets invested for the long-term can improve your financial plan’s success rate, and selling investments due to unpleasant headlines can turn temporary price declines into locked-in market losses.
• Don’t assume you should get rid of debt. Although high-interest and variable-rate debt should be paid off as quickly as possible, other types of debt do not need to be eliminated during high inflation. For example, if your mortgage is locked in at a low interest rate, now is not the time to pay it off with financial resources that could otherwise be put toward weathering inflation. However, it is also not the time to take on new debt that will depreciate in value. 
• Don’t sacrifice planning for your future. Retirement contributions might help your short-term cash flow, but you could miss out on tax benefits, additional money from an employer match, and years of compounding. Talk with your financial advisor about alternate short-term liquidity solutions, and if you do have to pause retirement savings, set a timeline to restore it.

The biggest financial mistake that occurs during times of high inflation is failing to be proactive. Higher everyday costs will be felt daily and cannot be ignored. However, if you don’t pause to reassess your strategy for riding inflation, you could be pushed into making rash, reactive decisions that affect your future success.