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According to the U.S. Labor Department report released on November 10, 2022, the inflation rate accelerated to 7.7% for the 12 months ending October 2022. These figures are a reason to worry for Americans because, in a period of economic uncertainty and inflation, the most obvious impact is the weakening of the dollar and high-interest rates. Further, prices go up, and there’s an economic slowdown.
The Fed may intervene through anti-inflationary measures, such as increasing the base lending rate by 75 basis points, as it did during the last Federal Open Market Committee(FOMC) meeting. But before the impact of such policies can be felt by the ordinary citizen, it’s often a challenging phase whereby one must tighten their belt to stay afloat. In this discussion, we explore what you can or not do to manage inflation at a personal level.
Control Your Expenses
During inflation, individuals’ saving habits are at risk because prices are high, and there’s little to spare every month. However, you can still spend less by re-organizing your budget and spending money on essentials.
You can manage your expenses with the following tips;
- Check what you spend and look for alternatives to big spending. For instance, do away with cable TV that may have costly subscriptions and start watching online entertainment services like YouTube, Netflix, and PrimeVideo.
- Stick to your budget plan and ensure you spend money on what is necessary. Avoid expensive malls where you may be tempted to buy things on sale.
- Most people are completely unaware of how much they spend in their bank account every year. It’s time to review your bank account statement to get an idea of the costs associated with the account package. You can close the account and open a convenient savings account.
Diversify Your Investment Portfolio
Typically, inflation devalues the currency, and therefore some assets may depreciate. However, having a portfolio mix that appreciates can position your money to increase over time, even during inflation. Instead of saving in just one scheme, you can have multiple assets such as a 401(k) plan, individual Retirement Account (IRA), stocks, index funds, bonds, and ETFs with different levels of risk. You can talk to a financial advisor or planner to help you figure out the ideal plan that may work for you.
Debt consolidation during inflation can help in lowering your repayment amount. If you have many debts, such as a personal loan, advance cash from CreditNinja credit card debts, quick loan, auto loan, payday loan, and mortgage, you can discuss with your lender the available options to enable you to manage the installment. However, debt consolidation policies may depend on the lender, type of loan, and credit profile.
Consider Lowering Insurance Premium
Insurance policies, whether life, health, auto, or homeowners insurance, require monthly or annual payments known as premiums. As noted during inflation, every coin saved can impact how you tackle the rising cost of living. If you have a running policy, you can consider the following tips to reduce monthly premiums;
- Bundle your insurance policies by taking out coverages from one carrier. You could enjoy some discounts.
- Shop around for cheaper alternatives before taking out any policy.
- Suppose your home is above 40 years and without any upgrades in its plumbing or electrical system. In that case, you can consider top-rated home insurance for older homes like the HO-8 policy, which may cost less than a standard policy.
- Increase the amount of deductible
- Secure your home with anti-theft and anti-fire systems.
- Improve your credit score.
Inflation can be tough, and most people are forced to adjust their spending to cope with the increased cost of living. However, with the above tips, you can make your situation more manageable.
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