Cost of Living Crisis: Top Tips to Protect Your Wallet Against Spiraling Inflation

Inflation – rising consumer prices – is a slow erosion of your money over time and it’s starting to seriously bite.

Prior to 2021, the United States had not seen annual underlying inflation well above 3% for nearly 25 years, says Michael Ashton, managing director of Enduring Investments, an investment and advisory firm in Morristown. , New Jersey.

The spike seen over the past year in the costs of fuel, used vehicles, groceries and just about everything else is the kind of sudden, systemic increase that can shock everyday spending. of most people.

Inflation is not the same for everyone

Inflation hit a national average of 7.5% in the United States in January, but that probably won’t be your inflation rate, Ashton said. In the euro zone, inflation rose to 5% in the same month.

You may consume different items than the average person and you may not live in an average place, so your particular inflation rate most likely varies from the average, according to Ashton.

With inflation eating away at your purchasing power, how can you protect yourself?

Rather than agonizing over a single number like losing purchasing power to recover, use the small money moves below to improve your financial situation slowly but surely. Here’s how:

Review your expenses

First, prune discretionary spending, voluntary spending in categories such as leisure or travel, by only 5%. It’s one of those gradual changes that isn’t that hard to make and goes straight to your personal bottom line.

Don’t delay a major purchase; prices are likely to rise.

If you can, shop strategically by buying more generic branded products. Save on necessary expenses by using coupons and in-store loyalty programs. For readers in the US specifically, using membership cards (like Walmart+ and others) to pay 5 cents (€0.04) less per gallon of fuel could help keep you on the road.

Look for savings

Eliminate any fees you pay for credit cards or bank accounts (late fees, monthly or annual service fees, ATM fees, etc.). Many banks waive these fees, and credit cards often offer no-fee options.

Renegotiate your satellite TV, streaming or cell phone bill for possible savings.

“I can say from my own personal experience – it’s amazing how easy it is,” Ashton noted. He says that every time he called his cell phone provider, they would offer him a much better plan than the one he currently had. “And that only happens if you call,” he added.

Ashton now makes a habit of calling once a year and asking, “What’s the best plan you have, and should I be on that?”

Reduce the number of subscriptions you have, even if there is only one.

“You should check these every once in a while, because sometimes they sneak in a price increase, and it just shows up on your credit card,” Ashton said.

Try to bring more money

Look for financial institutions that pay higher interest rates than what you currently earn (if you earn anything). Online banks and credit unions often offer high-yield savings accounts that sweeten returns, especially when interest rates rise.

Perhaps the most powerful idea of ​​all: ask for a raise at work. If you haven’t received a raise in a few years, you’ve probably taken what amounts to a pay cut because of inflation, Ashton said.

Get an inflation-indexed savings account

Another inflation-fighting idea: Series I savings bonds. They were created specifically to protect consumers’ purchasing power against inflation, says Zvi Bodie, professor emeritus of finance at the University from Boston.

Bodie holds a doctorate in economics from the Massachusetts Institute of Technology and has become a strong supporter of Bonds I.

Bond rates are pegged to the rate of inflation, which recently topped 7%, he notes. They are a perfect haven for short-term savings. And it’s not a bad addition to your long-term nest egg, either.

A minimum bond investment through TreasuryDirect.com is just $25, and an individual can invest up to $10,000 per year in savings bonds with electronic purchases. Bonds pay fixed interest plus the rate of inflation, adjusted twice a year.

You can withdraw your savings without penalty after one year, but if you cash it out before five years, you will lose interest for the last three months.

“So what you get is basically a savings account that can’t go down, and will go up with inflation,” adds Bodie. “Do I need to say more?”

  • This article was provided to The Associated Press by personal finance website NerdWallet.

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