Inflation continues to affect our economy, and there is plenty of talk about how to keep rising prices from negatively affecting your savings and your everyday finances.
Poor money management is the most common reason why inflation hits harder in America. Inflation has been around 8% for most of 2022, the biggest year-over-year jump in over 40 years – a generation. That’s why you need to proactively manage your finances in order to survive and thrive in these times.
Here are some practical money management tips to improve your finances and give inflation a run for its money:
A realistic personal budget is the first step in developing sound financial habits. It is the most overlooked thing that people miss.
A simple budget will show you where your spending is out of line, places you can cut back or reduce spending, and where your money is going. A good budget that is regularly updated will reduce unnecessary spending and help you save more.
Installing one of the many money manager applications is another way to keep track of your regular purchases. Many of these apps sync with your computer, making it simpler for you to access them from anywhere and at any time. Do some homework before selecting one. Some banks have their own tool that directly syncs with your account(s) and makes it even easier to monitor.
Depositing any portion of your income into a savings account is another good money management strategy. You can automate this, so you do not even have to think about it. For example, deposit $20 every paycheck into your savings account. It may not seem like much, but forming the habit is the most important thing. You can always increase the amount when your budget allows.
Once you have a budget and start saving, you need to establish an emergency fund. This is not a savings account. Most Americans do not have a fund to cover emergencies. However, you should have 3-6 months of expenses set aside in case of a medical situation or another emergency that could occur.
You can always look for discounts, coupons, and offers before you shop and compare prices to ensure that you aren't paying more than you should. This is especially true of larger purchases where you might save hundreds of dollars at a time.
There is such a large number of subscriptions that tracking which ones you are paying for (and USING) is difficult. This is especially true of the movie, TV, etc. channels. Almost everyone is subscribed to channels they no longer use. If you think you might use it again in the future, STOP it anyway. Most of the time, you will get a reduced offer to sign up again and actually save the payments, and the new payment will be lower if you decide to use it again.
Many people use their credit card(s) to cover expenses when they are short of cash. With inflation rates at record highs, interest rates are going up just as fast. So, your cost of using the card is extremely high and not worth it. Avoid using credit cards whenever you can. Most people do not know that max credit card interest is just as high as a payday loan. The limits are the same in most states. You should avoid payday loans for the same reason, only for rare emergencies, and should view credit cards the same way.
Paying all your bills on time every month essentially gives you benefits; you avoid late fees/penalties and improve your credit scores.
If you save up for large purchases, you will find it will save you tens of thousands of dollars over your lifetime. By saving and only buying when you have the money, you will avoid all those finance charges (remember the fast-rising interest rates?) and not have monthly payments for years on end for each purchase.
Start thinking of the long term and not just the short term. We all tend to focus on this week, this month, and so on. However, having a long-term process for your finances could be the difference between having a comfortable retirement or living on the edge when you are older.
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Content Source: Statista