Surviving Inflation on the #BidenBudget
By Kelly Ann Martin
@Behance
It’s no secret that the country is feeling the squeeze of inflation in 2022. If you’re like most of us, you’re probably wondering if it’s time to get on the #BidenBudget. Here are several tips for surviving the price hikes of the Biden administration:
Dissect Your Budget and Locate Weaknesses
When we get into the flow of making and spending money, we get a good feel for how much we are spending month to month. In inflationary times, however, we don’t always notice when our spending patterns have changed. Take an honest look at your budget and see how your money is being spent. If you don’t have a budget, consider this unsolicited advice to make one! An easy way to start is by downloading an excel spreadsheet of your recent expenditures from your online banking account. You can then divide out the various types of expenditures/incomes into categories to see a detailed picture of your outflows and inflows. Once you are able to point out areas in which you can cut back or you are spending more than you intended, make a plan.
NOTE: There are apps such as Mint that can help you keep track of how you are doing on spending throughout the month
Avoid Taking on New Debt
If you are considering financing a car or house right now, be cautious of over-leveraging and accumulating monthly payments that don’t take into account the rising interest rates we’re starting to see as the Federal Reserve intervenes to curb inflation. Moreover, housing prices in some regions of the country are at an all-time-high while rates are climbing. Be aware of how increases in monthly mortgage payments can sneak up on you with rising interest rates. For reference, we bought a house last October at an interest rate of 3.15 percent and a monthly mortgage payment of $2500. With an interest rate of 5.32 percent, our monthly payment would be around $3,000. Yikes. Often times, lenders will tell you what they are willing to lend based on your credit history and income. Though you could, in theory, reach their top number and still make the payments, it is usually wise to land under their maximum lending amount to leave room for fluctuations in the cost of living.
NOTE: If you must take on new debt, avoid variable rates
SAVINGS
Unfortunately, during economic downturns, companies can sometimes go through rounds of layoffs since they are also trying to cut costs. If you are stable and solid in your current job, you are in a great place; however, your job can suddenly be in a vulnerable position during a recession, which seems impending. Nearly 60 percent of Americans are living paycheck to paycheck, according to CNBC. In other words, most Americans would be SOL if they lost their source of regular income. I think it wise to prepare for most possibilities, so I suggest starting to save NOW and setting aside at least enough money for six months of living expenses. If you do not have a savings account, now is the time to get one.
Consider Deleting Social Media
This one may seem irrelevant to fluctuations in the Consumer Price Index (CPI), which measures the cost of the average basket of consumer goods, but if you’re like me, you probably follow several Instagram accounts that post cute (a.k.a expensive) outfits, international travel photos, and all the great new things you should be trying and buying. The harsh reality is that we see things that everyone else has and feel like we should have them too. It’s easy to want to start trip planning or go shopping when you see everyone else doing it! Therefore, because we are so easily enticed by the things we see on social media that we just cannot live without, it can be healthy for our minds and wallets to take a break from constantly looking at these things!
Boost Income by Monetizing a Hobby
Another great way to stay afloat during inflationary (or recessionary) periods is by either picking up another job or monetizing a side hobby. For example, if you like to take photos or have a solid camera, you can offer to take pictures for people that need either senior portraits or family photos for a discounted rate – which ultimately benefits them for not having to spend as much, and you still make money out of it. If you are good at crafting, start an online Etsy shop and sell your pieces! Either way, if you have a skill or hobby that you can monetize, now is a good time to start looking for ways to do it – and offering a reasonable price for these things can help those who are not able to keep up with higher prices from bigger companies.
Ultimately, inflation is never easy to manage as a consumer, at least not for sustained periods. Usually, inflationary periods result in credit crack-downs from the Federal Reserve to stabilize the price level and protect the U.S. dollar, which can sometimes trigger economic slumps. This is why saving for a rainy day is always a good idea! So whatever you decide to do to combat inflation, just remember that ultimately, we should, in the words of famous American investor Ray Dalio, “Earn more than we spend, and treat each other well.”
