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Singletary Scale: Inflation: How To Spend Less – Or Earn More – As Prices Go Up


The pandemic has posed another unwanted threat to our lives: inflation.

Consumer prices are rising, and if you live paycheck to paycheck, that means you’re having a harder time paying for food, gas, and other items.

Inflation hit a 13-year high in September, with consumer prices up 5.4% from a year ago, according to the Bureau of Labor Statistics.

“Inflation has been a surprising and unwanted guest appearing to persist at a high level at a time when we all hope to put aside the devastating economic impacts of the pandemic,” said Mark Hamrick, senior economic analyst for Bankrate. “Like the slowdown caused by the pandemic itself, it exacerbates inequalities in wealth and income. The rich can adapt. Those with low incomes, not so much. It’s like some people just can’t take a well-deserved break.

Like Blue Origin’s rocket exploding in space, the prices are far higher than we were used to before the pandemic. But it’s not a fun ride. Here’s how to deal with rising consumer prices.

What changes do I need to make to my budget to fight inflation?

This is a time when you should reconsider how you spend your salary. Even if you’ve cut until it hurts, look for additional cuts.

• The obvious places to cut are restaurants or streaming services. When was the last time you checked your mobile plan?

• Use apps and the Internet to find lower prices where they are available, including gasoline.

“When prices don’t change that much, people may be inclined to spend less time shopping, thinking it might not make a big difference,” Hamrick said. “Think of shopping now as investing the time to find better deals. “

Supply chain disruptions can continue to push consumer prices up, so you may want to start your vacation shopping early, Hamrick said.

Hamrick emphasizes this: is this a year when something more personal, like baked goods or a personalized photo album, could be replaced at a lower price?

Put off unnecessary purchases until supply issues are resolved and prices drop.

“Whether it’s an updated iPhone or some other item of clothing to hang primarily in the closet, most Americans are just consuming more than they need,” Hamrick said.

Is there anything I can do to reduce my food costs?

In an inflationary environment, substitutions can be your financial ally.

Food and shelter costs rose in September – and, taken together, accounted for more than half of the monthly increase in all items measured in the seasonally adjusted Consumer Price Index, according to the Bureau of Labor Statistics. Prices for meats, poultry, fish and eggs rose 2.2% in the month, and beef prices rose 4.8%.

Food prices have risen largely due to weather-related shortages, transportation issues and understaffing. The prices of meat and fish are rising faster than the prices of vegetables, so take this into account when planning your meals at home.

Hamrick said he recently went shopping to bake crab cakes for his son, who is visiting from Los Angeles. A 50% price hike for crabmeat changed the menu.

“I bought chicken thighs and cooked them at a fraction of the cost,” Hamrick said. “Now is the time to try to spend as much time as possible preparing meals at home, using less expensive items as much as possible. “

Should I change the way I invest for retirement?

Inflation doesn’t really change what you should have done from the start, which is diversifying, said Carolyn McClanahan, a certified financial planner who founded Life Planning Partners, based in Jacksonville, Fla.

“Through thick and thin, the best way to prepare for any economic environment is to have a diversified portfolio,” said McClanahan. “If you aren’t already diversifying, now is the time to make that change. “

If you are an ultra-conservative saver who has avoided stocks because you are afraid of the stock market, you might want to consider inflation to be a risk as well. If you don’t at least keep pace with inflation, you lose the purchasing power of your money.

“Where interest rates are now, investors have to take a little more risk to earn a return above inflation,” said Ben Bakkum, quantitative investment partner at digital consultancy Betterment.

Is there anything I can do to benefit from rising inflation?

If you have money that you think you won’t need for a while, consider buying bonds, recommends McClanahan.

Series I Savings Bonds, which are issued by the Treasury Department, allow investors to earn a combination of a fixed interest rate and the inflation rate, adjusted semi-annually. The composite rate for bonds I issued from May to October is 3.54%.

Is there any good news about rising inflation?

If you are receiving Social Security benefits or Supplementary Security Income, you will see your payments increase due to rising consumer prices. The Social Security Administration announced a 5.9% benefit increase for 2022.

If inflation slows down next year, which some believe is possible as supply chains normalize, Social Security recipients will continue to receive the highest payments anyway, Hamrick said.

In addition, one of the few potentially beneficial effects of rising inflation will be that the Federal Reserve may well raise benchmark rates as soon as possible, and more than previously believed, he said. declared. This is good news for savers.

“Previously, stingy returns on savings should start to rise,” Hamrick said.

It’s hard not to panic about inflation when your paycheck doesn’t go as far as you need it to. Nevertheless, keep things in perspective. It wasn’t the 1970s when prices skyrocketed.

“The recent headlines on rising inflation have been alarming, but inflation itself is not abnormal if it is not out of control,” Bakkum said.

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