Even if you’re not exactly sure how inflation works, you’ve almost certainly been affected by it if. For example, you’ve probably noticed higher prices at your local grocery store or increasing travel costs. Inflation is simply the rise in prices of goods and services over time, which means that your dollar doesn’t go as far this year as it did last year. In times of high inflation, many people look for strategies to lessen inflation’s impact on their finances, such as working with an advisor to plan and set financial goals. Read on for a few examples of how inflation might affect your wallet in the coming year and what you can do about it.

Rising travel prices

If you’re generally budget-conscious and don’t spend a lot on big-ticket items, inflation might not have affected you very much yet. However, it might end up impacting you in a way that’s hard to avoid: travel. Even if you’re not a frequent traveler, you might splurge on at least one trip to grandma’s during the holidays or the occasional beach trip with friends.

Dollar for dollar, travelers who spend a lot on luxury accommodations and first-class airfares are the ones being hit hardest by inflation. However, budget travelers are likely to be affected more because they usually have less cash to spare overall, which means a few dollars more for a plane ticket or hotel room might break the budget.

For those travelers, inflation may mean shorter vacations and fewer visits to far-flung relatives throughout the year. Or it might mean saving money in other ways, such as taking trips closer to home, or staying in less expensive accommodations like hostels.

Increased mortgage interest rates

Buying a home is another time inflation might add additional stress. During times of high inflation, the Federal Reserve tries to control inflation by increasing something called the federal funds rate, which is the interest rate banks charge other banks to borrow money. This rate affects the interest rate banks charge to consumers for loans, such as mortgages, personal loans, and credit cards.

This means taking out a home loan tends to get more expensive as interest rates climb. High mortgage rates can mean higher monthly payments, which may put home ownership further out of reach if you’re already struggling to afford a home. If you’re a potential home buyer right now, you may have to delay your home purchase or consider a less expensive home if interest rates push monthly payments outside of your financial comfort zone.

Higher cost of living

One measure of inflation is something called the consumer price index, which collects data about the prices of a wide array of goods—from hamburgers to dental appointments—and averages them. When you read about the consumer price index rising, this means that the average price of everyday goods has gone up.

What does this mean for you? It means that when you’re buying virtually any product or service, you’ll pay more for it than usual. In the last year, the consumer price index rose more than 8%. This might not seem like a lot for everyday purchases—what’s a few more cents when I’m buying a donut?—but it adds up when you look at your total spending.

Taking stock of your finances

Taking a look at inflation’s impact on your spending might involve an uncomfortably close look at the state of your finances. You might find that you’re not exactly sure to move forward, especially if your spending doesn’t line up with your financial goals anymore. Many people take this opportunity to talk to a financial advisor, accountant, or tax professional. It might cost money, but you may save money in the long run by achieving a greater understanding of what you’ll need to do to achieve your goals.

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