American consumers have been confronted with rising prices on all sides, from gasoline and groceries to clothing and household appliances.
According to the Labor Department, US inflation was 8.3% in April, close to March’s record high of 8.5%. The prices for food, travel, accommodation and petrol were particularly high.
How are consumers dealing with this?
Unfortunately, there is no magic solution to avoid the rising cost of living. Most people can’t just move to a cheaper apartment to save on housing, or give up the commute to avoid gas. However, financial planners have some strategies that they recommend clients use to mitigate the effects of inflation on their bank accounts and investments.
The first step is to understand where your money is going. Almost all of the financial planners surveyed wealth It’s recommended to review recent credit card and bank statements so you can see exactly how you’re spending your money and how that spending compares to a few months ago. Once you’ve categorized your spending, it’s easier to see where there’s room to cut or where you can redirect more funds.
“Write everything down,” says Lisa Fischer, chief lending and growth officer at Mission Lane, a finance company that helps people rebuild their credit ratings. “Whether you’re doodling in a notebook or typing out an organized list, a detailed record helps you visualize your cash flow and save when needed.”
Once you’ve done that, here are seven more tips from financial planners to help you cope with rising prices.
1. Ask for a raise
Workers have more power in today’s job market than they have in a while. Use this to your advantage.
“You have the richest job market of your life right now,” says Matt Atwood, a certified financial planner at TimeWise Financial. “Make sure you’re being paid fairly for your role.” Do some research on a site like Payscale to see how your salary compares to others in your industry.
Request at least a cost-of-living adjustment for price increases – ideally around 10% to keep up with inflation. And if your boss can’t or won’t increase your salary, maybe it’s time to update your resume and look for something new. While it’s impossible to say how long the job market will be this good for workers, it never hurts to see what else is out there.
“On your request [for a raise] doesn’t get a fair response, then use this job market to your advantage,” says Atwood.
2. Try meal prep
It’s not for everyone, but meal prepping — setting aside a block of time to cook meals for a few days or a week using the same ingredients — can help save money on groceries, food waste, and Uber Eats if you’re too tired or short of time to cook.
“I recommend checking out the r/MealPrepSunday sub on Reddit and cooking on Sundays to take the stress out of the work week,” says Atwood. The subreddit often features ideas for “differently seasoned meals with similar ingredients to limit the monotony of eating the same thing all week.”
There are also countless videos for budget-friendly food on YouTube.
3. Keep investing (or start investing).
It may seem counterintuitive to invest when the market is falling. But it’s actually a good time for anyone not close to retirement to invest their money.
“Historically, investing is the best hedge against inflation, and you have time on your side,” Atwood told Gen Z and Millennials.
That doesn’t mean going all out: working people of all ages should have at least three to six months of living expenses saved up in a savings account in case of an emergency. And if not, you should work towards that goal. Putting away even a few dollars a week can increase your savings.
But don’t carry too much cash on hand, says Tyler Martin, a certified financial planner at Stonebridge Wealth Management.
“Excess savings lose purchasing power,” says Martin. “The market is on sale right now.”
4. Know where your efforts will pay off the most
Yes, prices are increasing, but not evenly. The inflation rate is measured by the consumer price index, which includes a “basket of goods” including housing, energy, food, transportation, etc.
“When you’re saving, focus on the items that get the most bloat,” says Martin. He points to gas as a huge inflation driver that is likely to hurt many households more than other cost increases.
“You can usually find better gas prices at member clubs like Costco or Sam’s Club,” he says. “There are also apps like Upside that you can use to earn cashback when you fill up.”
5. Don’t buy “new” products
Don’t pay full sticker price for products you can find for less money or no money at all. “Before you buy a brand new one, you should consider all buying options from thrift to trading,” says Andrea Woroch, finance expert and author.
She suggests joining Buy Nothing groups and checking out sites like FreeCycle.org to find used (and sometimes new) goods for free. Look to Poshmark or Tradesy for used clothing, and to OfferUp for second-hand homeware and furniture. For certified refurbished electronics, use eBay and Facebook Marketplace for all types of discounted items in your area.
Local buy-nothing groups can offer more than just free stuff, says Lauren Anastasio, a board-certified financial planner and head of financial consulting at Stash.
“You might find someone in the group willing to donate their time and help with the sewing [or] Mend clothes so you can save money on a tailor or new clothes, or someone experienced to help around the house to limit your maintenance costs,” says Anastasio. “You can also pool resources, as participants in these groups often borrow tools, kitchen items, entertainment items, etc., so you can skip the expense of buying something you only need to use once.”
6. Get money back for everything else
To get even more savings on items you need to buy, e.g. B. pet food or groceries, install a browser extension like Rakuten that gives you money back on purchases. How much you get back depends on the store, but everyday retailers like Chewy, Target, and Walmart offer 1%. Some stores offer even more cashback; At the time of writing, Old Navy was offering buyers 2% cashback and Nike was offering a whopping 10%. It might not seem like much, but it all adds up.
If you have good credit and pay off your credit card bill in full each month, then take advantage of cash back cards.
“Think about where you’re spending the most money and try to maximize those categories,” says Ted Rossman, Senior Industry Analyst at Bankrate.com, noting that he ranked American Express Blue Cash Preferred for its 6% Cashback used in US supermarkets. “There are many cards that give 3% to 5% cashback on other popular categories including travel, dining, gas, online shopping and more.” You can use a site like Bankrate or NerdWallet to find the best options for your budget to research.
Also, look for shopping offers from your credit card issuer. American Express, Bank of America, Chase, and Capital One, among others, offer cardholders special offers at certain merchants in addition to cashback. These offers vary by issuer and location, but you can find them by logging into your credit account.
“You can’t control the rising prices, but you can take advantage by using cash back tools to top up the cash back you earn on your credit card,” says Woroch.
7. Watch out for shrink inflation – and shadow inflation
Watch out for what’s called shrinkage inflation, which occurs when companies offer their customers less of their products at the same or higher price, says Rob Stevens, financial planning specialist at TIAA. This is particularly common in the grocery store and could mean fewer pretzels in a bag or less aluminum foil on a roll.
“To mitigate this, buy generic products, which tend to be slower than branded ones to use this tactic,” says Stevens.
Another offshoot of inflation to watch out for: shadow inflation, or when the quality of a service or product declines. For example, a hotel may no longer offer free clean towels every day or an extensive continental breakfast. Your favorite TexMex restaurant may charge for the chips and salsa that used to be free. Essentially, you’re getting fewer amenities or less quality service for your money.
These changes in quality are difficult to measure officially and are not accounted for in government inflation statistics. There’s also not much you can do about shadow inflation other than being aware of it so you don’t get hit with additional fees that add to the restaurant bill.
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