What do we all have in common these days? Feeling the pain of inflation!
If you’ve purchased gas, groceries, a car . . . or really anything lately, you’ve noticed things are more expensive. Not only is inflation the highest it’s been in 40 years, but it grew 8.6% in May 2022 over the previous year. Now that’s a serious jump.
Does this mean you should hit the panic button? Definitely not. The best way to thrive during high inflation is to educate yourself and find ways to protect your money and your sanity.
Need a few ideas? We’ve got you covered.
1. Let’s start off with a less obvious strategy . . . just breathe. I mean that literally . . . take time to meditate, get outside for some fresh air, or take some deep breaths to remind yourself that you are safe. Understand that this too shall pass.
We’ve all experienced difficult times and have come out on the other side . . . so will our economy. If things feel too expensive for you, take time to really focus on what matters most and spend your time and resources there. Check in with family and friends, take a hike, use this time to purge your closet or paint that room you’ve been meaning to do. Shifting your perspective from lack to abundance can really help you thrive during this time.
2. You know this one is coming, but it’s time to review your spending. Perhaps you’ll have a few aha moments. Are you using all those streaming services, the gym membership, or reading those magazines? Is having Uber Eats deliver 3 times a week really necessary or could you pivot to cooking at home more often?
Wait, do you even review your spending on a regular basis? If not, now is the time. Get to know your numbers. I promise that stress loop in your brain will slow down and eventually go away with the simple step of tracking your expenses and knowing your spending habits. Friendly reminder that this is just data, not a measure of your worth.
3. Get smart with your shopping habits. Inflation can make day to day living more difficult with the soaring prices of non-negotiable items.
Combine errands or spend more days working from home to avoid overspending on gas. Consider alternatives to buying name brand or shop second hand. Create a meal plan to avoid impulse spending at the grocery store. Comparison shop things like insurance, cable, internet, cell phone, etc. to reduce monthly fixed costs. Enjoy a staycation to visit some local attractions instead of overpaying for flights and hotels. Get creative and make saving money a game.
4. When times feel uncertain, having cash on hand offers peace of mind. Now is the time to increase your emergency, or as I like to say, opportunity fund. This fund is there to protect you from going into debt (or further into debt) in the event of an unforeseen circumstance.
If you’re in the beginning stages of creating an opportunity fund, start now and slowly save your way to your first $500, then your first $1,000 and keep going. Ideally your opportunity fund is enough to cover 3 to 6 months’ worth of living expenses. Setting up an automatic transfer to your savings account can make this process easier.
Take advantage of high-yield savings accounts, typically found at online banks. If your money is going to be sitting in an account for an emergency or another goal, it might as well be working harder for you. Learn more about high-yield savings accounts here.
5. Since a strategy to reduce inflation is to raise interest rates, now is a good time to pay down any debt, particularly high-interest debt, in the event interest rates continue to rise. This is especially important if you have any variable interest rates on your debt, such as a variable interest rate credit card or loan.
If you can avoid taking on any new debt in the near term, that is ideal. If that’s not possible, then try to lock in a fixed interest rate so you aren’t surprised by future increases.
Try to remember that life is always evolving, and this uncertain time of high inflation will eventually be in the rear-view mirror. If you still feel like you could use some support, reach out to your financial advisor for reassurance.