Nov. 14, 2022
Tips for taming inflation’s impact on your personal finances
Reports in early November suggest inflation may be easing up slightly from the 40-year highs of 8% experienced in 2022. But higher prices (and interest rates) likely won’t move back to pre-pandemic levels any time soon.
And with inflation increasing recession worries, our shrinking spending power has been on our minds more than usual. HerMoney Media, the company I founded, and the Alliance for Lifetime Income conducted a State of Women 2022 study recently that showed the following:
73% – inflation risk topped the list of women’s financial concerns, even ahead of 71% Illness or disability. Followed by market volatility at 70%, with 58% concerned about longevity, and 43% felt unemployment was a top financial concern.
Despite worry about rising prices, only two in five surveyed (41%) say they knew how to protect themselves from inflation risk.
Fortunately, inflation protection can be narrowed down to a few key steps. Here’s a look at some of the best financial moves you can make as we ride the wave of higher prices into the holiday season:
Prioritize High-Interest Debt
Americans have been charging up a storm in recent months and credit card debt is now back above pre-pandemic levels. If you owe money on credit cards, make it a priority to pay off the high-interest debt first. That means paying at least the minimum amount due on all of your other credit accounts and throwing even more against the card with the highest interest rate. Once that balance is wiped out, move on to the card with the next-highest interest rate. This method can help you save money because the faster you pay off the debt, the less it will cost you in interest and fees.
Curb Impulse Spending
Another way to fight inflation is to focus on your ‘needs’ – such as rent, food and utilities – and trim your budget back in the ‘wants’ department. Easier said than done, right? But you don’t have to deprive yourself completely. Cutting back on food costs could mean eating at home more often instead of dining out several times a week. Or opting for a lunch out instead of a more expensive dinner. It could also mean canceling services or subscriptions you don’t use anymore and skipping impulse purchases as often as possible.
Pause Your Home (or Car) Search
Unless you are in the small group of people who can afford to pay cash for a new home or SUV, this is a good time to let the real estate market continue to cool off and interest rates settle a bit. So, if you are looking for a new house, but already have one, consider pressing pause on your house hunt for a while. As the Federal Reserve has increased short-term interest rates six times in short order, the price to borrow money has surged, making it much more expensive to buy a house or car.
Consider Delaying Retirement
If you are closing in on retirement, you have some options to consider. First, there’s no law that says you are required to stop working at 62, 65 or even 67. Research shows that people who continue to work later in life often live longer. To maintain a higher income level in the future, you can delay taking Social Security benefits. Why? For every year you delay taking SSI until age 70, your benefit increases by about 8%, which can really add up. Visit the Social Security Administration’s website for more details about delaying retirement benefits.
With reporting by Casandra Andrews
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