A customer pumps gas into his car at a gas station on May 18, 2022 in Petaluma, California.
Justin Sullivan | Getty Images
Rising inflation and record-breaking gas prices are wreaking havoc on many people’s wallets.
The percentage of Americans who feel the impact of inflation to a great extent rose 5.6 percentage points to 30.5% in June, according to a recent survey by consumer research platform Attest, with those describing the impact as “very severe.” up from a month ago.
This shouldn’t come as a surprise, given that the average price for all items has increased by more than 11% over the past two years, according to moving valuation company Move.org. Prices of all types of gasoline have risen 48% over the past year, while rental prices have risen 10.75% over the past two years, the company said.
Consumers cannot control inflation, but they can make monetary decisions that help limit the negative impact of higher prices. Here are five tips to lessen the sting of inflation now and in the future.
1. Get a handle on your spending
People don’t often keep track of their expenses by manually entering them into an Excel or Google spreadsheet. That’s why Rob Stevens, TIAA’s retirement income specialist, recommends using a free smartphone app that syncs with your bank accounts and credit cards. That way, you can see your spending in real time and make adjustments as needed, he said. There are several free apps to choose from, including Mint and NerdWallet.
2. Reduce spending where you can
Even small cuts can make a big difference overall. Try to buy generic products, which tend to be cheaper than branded ones, and buy special sale items whenever possible, Stevens said. They might also consider canceling some streaming services purchased during the quarantine, he said. That’s something 35% of Americans told CNBC in an April poll conducted by Invest in You. And even the rich are more likely to take this step, especially younger millionaires, according to the latest CNBC Millionaire Survey.
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Another money-saving option could be to buy the car you lease. This could be particularly appealing to someone who has a lease coming up soon, as the purchase price — set when the lease is taken out — will likely be well below the cost of a new or used car, he said.
Another cost-saving step could be to ask your current credit card issuer for a lower interest rate. According to Matt Schulz, LendingTree’s chief credit analyst, issuers grant such a request more often than consumers would like.
3. Deal with adjustable-rate debt
The Federal Reserve has raised interest rates and is likely to do so again, meaning the cost of adjustable-rate debt will continue to rise. Paying off or paying off or consolidating that debt into lower fixed-rate debt is one way to stave off the blow of inflation, said Greg McBride, chief financial analyst at Bankrate.com. “It’s one less area of the household budget where you’re going to see cost increases,” he said.
4. Think long-term investments
To beat inflation, your total return must be greater than the total increase in the cost of living. One way to achieve that result is through long-term investments, said John Campbell, head of wealth planning for the East region at US Bank Private Wealth Management.
While many stocks have been decimated this year, if you can buy stocks of quality companies at a lower price over time, such as through a dollar-cost-average approach, you could keep pace with, if not outperform, inflation. That’s because the stock market’s overall performance has outpaced inflation rates over time, Campbell said.
Also, make sure you take full advantage of any company customizations that may be available in your retirement plan your company offers, Campbell said.
5. Invest in career and income potential
Now is a good time to start thinking about what you can do to increase your earning power, McBride said. Are there skills you can learn, certifications you can get, or training you can enroll in that will lead to higher wages down the road? Even if it doesn’t pay off immediately, these moves can eventually lead to higher wages, which is a way to offset the rising costs caused by inflation and benefit you in the long run.
With wages rising, it might also be a good time to ask for a raise, Stevens said. According to the U.S. Department of Labor, private sector wages and salaries grew 5% year over year in the first quarter of 2022, remaining in line with the fourth quarter of last year. It is also wise to keep an eye on growth opportunities in your business. Be sure to update your resume so you can take advantage of opportunities that may arise, he said.