The stock market didn't offer impressive returns in 2007. But one area of the economy had a comparatively banner year: milk.
Yes, the price of milk and other goods, such as eggs or a tank of gasoline, grew at a rate that would make stock investors faint with joy. From the start of the year through November, fresh milk prices rose 23.2 percent, according to the latest data from the Bureau of Labor Statistics.
Meanwhile, the S&P 500 returned 3.5 percent for the year; the Dow Jones industrial average did a bit better at 6.4 percent.
When milk costs $3 to $4 a gallon, a 50-cent rise or so in price may not pinch your budget too much. And food prices are notoriously volatile. They, along with fuel costs, are excluded from inflation data the Federal Reserve uses to make policy decisions.
Those are the very products, though, that you can't avoid buying. When their prices jump, and those of other goods, too, here's how to make sure your finances don't get off track.
Maximize your savings
One way to hedge against rising prices is to grow your savings at the same rate or more.
Through November, the core consumer price index, which measures inflation and excludes food and energy prices, rose at an annualized rate of 2.4 percent. With food and energy added in, the rate was 4.2 percent.
That means to keep up with what you had to pay in the grocery store or at the gas pump last year, your money needed to grow by at least 4 percent. The same could be true in 2008.
You probably won't find a comparable yield at your local bank, where you may have a savings account. Online banks, however, which aren't weighed down by the cost of maintaining a branch network, tend to offer higher yields.
You can search for deals at sites such as BankingMyWay.com or Bankrate.com. A quick search on BankingMyWay.com just before the end of the year turned up a 5.22 percent yield at UFBDirect.com, with a minimum deposit of only $1.Modify your consumption
Even though it may seem as if you have no choice but to swallow higher food or gas costs, you can do some things to mitigate the impact on your wallet, said Chris Long, a financial planner in Chicago.
"Really understand, to begin with, how you're spending your money," Long said.
Once you know where your money is going, you can set up a budget. Or, if you already have a budget, doing an annual review will help you make appropriate changes.
You may be able to cut back on some discretionary spending, such as meals eaten out. But there also may be cheaper ways to consume those goods that have grown more expensive.
The U.S. Department of Energy offers advice on how to drive more efficiently (i.e., use less gas) at www.fueleconomy.gov/feg/drive.shtml. According to the site, you will improve your car's fuel economy by as much as 33 percent by simply observing the speed limit.
Find tips on smart grocery shopping at TheGroceryGame.com. One example: You don't have to run from grocery store to grocery store (using up more gas) to maximize sale prices. Each store generally offers the same discounts within a few weeks, according to the site.
Bank your raise
A raise in salary, which you may expect to kick in soon for 2008, also could help your budget. But Long says it's better to try and save the extra sum instead.
"If you can bank your raises, you're essentially cutting your consumption and living on less," Long said.
Plus, the more savings you accumulate, the more you will be able to spend your money as you like.
"Think about the long-term consequences of your purchases today," Long said. "Any consumption you do today is taking away consumption you do in the future."
E-mail Carolyn Bigda at email@example.com.