Inflation vs. You
If you have noticed your wallet shrinking lately, you are not alone. Almost everything costs more and it’s happening on a global level. It isn’t just hurting those who were living paycheck to paycheck before inflation reared its ugly head, but those who were previously living comfortably are feeling the sting as well. Some predictions show inflation sticking around into next year and talks of a recession loom. While no one has a crystal ball (even though many claim otherwise), we certainly know where we are today.
While we cannot control the pace of inflation or what goods and services cost, we do have some control over how we handle it. There are a myriad of reasons how and why we got here, but where do we go from here? The good news is, there are some steps you can take to help reduce the effects of rising prices and also feel a little more in control of your money.
Review Living Expenses
If it’s been a while since you reviewed your expenses, now is the time to do so. Insurance, for example, can be shopped around for not only a better price, but better coverage. Bundle these policies for additional savings. Is there a cheaper cell phone provider? Perhaps you can join a family plan. Household staples can be bought in bulk. Look for sales and coupons and buy at that time. Load up on paper products, for example, which never expire. Are you still using that subscription service? Take a good look at bills that are automatically paid each month and you may find something you didn’t even know you were paying. If you are carrying a credit card balance, you can potentially negotiate the interest rate. If you get a large tax refund at the end of the year, you may be withholding too much tax. Reduce the withholding and you can increase your take home pay (please consult with a tax advisor). Keep some of these tips in mind as you review your cash flow.
Think Twice About Large Purchases
If you have been thinking about purchasing a home or a car, these items have gone up significantly. Also, if you were planning to finance, interest rates have almost doubled. The price of a new car vs. a used car is the narrowest margin I have ever seen. However, if you plan to sell these items without replacing them, you may even make a profit. Yes, even on cars. If you are able to hold off on purchasing larger items until prices start trending back to reality, do so. That extra payment may put you in a worse financial position if you are already on the brink. The double-edged sword here is, when will that happen? Again, no crystal ball, but the other mindset may be, get it now if you expect the price to keep going up. My expectation is that these items will not continue accelerating at this pace and inflation will eventually be controlled. If you feel otherwise or there is an emergency need, you may want to purchase now.
The Importance of an Emergency Fund
At the onset of the COVID-19 pandemic, many folks lost their jobs and without any backup income. If we learned anything from times like these, it is to keep some money set aside in case something happens and you are no longer able to afford your necessities. A savings account is that vehicle. Keep in mind, it is not an investment. You should not expect historical stock market returns on a savings account. The role of an emergency savings is just that; to be there in case there is an emergency. It should be easily accessible, but not too easy where you are dipping into it to cover a vacation. And with the prices of necessities going up, perhaps it’s time re-evaluate how much you need in that account? Did your rent go up? Did the electric bill scare you? Maybe it’s time to add on or at least start one if you haven’t already.
Alternative Sources of Income
Are you long overdue for a raise or a promotion at work? Employers are desperate to keep good workers. The job market continues to remain strong despite layoffs within certain industries. Keep records of your performance and contributions and be ready to present them when asked “why should we promote you/give you a raise?”. Side gigs are an option for some, but not everyone. Use credit cards responsibly for cash back benefits or shop around for a better rewards card. Sell some items you no longer use. Everyone is looking for a deal and any little bit helps.
Inflation is something many of us in the Millennial and Gen X generations have not faced in our adult working years. We have gone through the tech boom and bust, the financial crisis, and now a pandemic and subsequent inflation. It’s difficult to predict economic cycles, but we know where we are today. Prices are rising and it may seem out of control, and for all intent and purposes, it is, so it’s best to concentrate on where you do have control in your particular situation. We do not know when prices will stabilize or ideally, fall; only time will tell. The cure for inflation is inflation! If we stop paying the exorbitant prices, they inevitably have to come back down. That is supply and demand and that is how economics works.