A customer buys lemons at a supermarket on April 12, 2022 in San Mateo County, California.
Liu Guanguan | China News Service | Getty Images
Federal Reserve Chairman Jerome Powell may have said it best when addressing the public at a press conference on Wednesday after the Federal Open Market rate hiked half a point. Committee.
“Inflation is way too high,” he said. “We understand the difficulties this is causing and are acting quickly to roll it back.”
The Fed is raising interest rates to rein in the economy as consumers grapple with the biggest price increases in 40 years. Inflation is starting to impact people’s spending expectations over the next few months, with 61% of Americans saying they’re worried about their financial situation, according to a March 23-29 Toluna survey of more than 1,000 adults.
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Many Americans now expect to have to spend more on a range of purchases, from personal care and home improvements to experiences such as vacations.
“As with any time you have a change in circumstances, such as a job change or considering buying a house, now is a great time to review your spending for the past three to six months,” Roger said. Ma, Certified Financial Planner, founder of New York-based Lifelaidout, and author of the book “Work Your Money, Not Your Life: How to Balance Your Career and Personal Finances to Get What You Want.”
How to set
Doing such an audit of your recent spending can help you make sure you know where your money is going and recalibrate if it’s being diverted from your financial goals.
Since inflation drives prices up so quickly, Ma suggests both checking your spending and revising your budget frequently.
“Plan it a few months at a time,” he said.
Also, since inflation is so pervasive, people may need to get creative in finding ways to cut their budgets. Ma noted that he’s seen customers cancel some subscriptions, as well as change their shopping lists — from buying more generic items instead of branded ones, to swapping more expensive steak for cheaper chicken, or even to the complete abandonment of meat.
Customers say “I was getting this fancy milk, but I’m okay with the grocery store brand milk,” he said. “People are totally making these kinds of decisions to fit into their budget.”
The good news is that many consumers are already making the spending changes they need to adjust to rising prices.
More than half of Americans said they were willing to try new brands of food and beverages, cleaning products and personal care products to cut costs, and about a quarter have already switched, according to the Toluna survey.
Bring extra money
At the same time, if you’re having trouble cutting costs, now is also a good time to see if you could potentially make more money, Ma said.
This means considering changing jobs in the hot market or starting a side hustle that could bring in some extra cash to help balance your expenses.
Ma also suggested that those who received a tax refund use it to inflate their savings, pay off debt, or allocate it to other financial goals. Also, if you’re struggling to keep up with month-to-month price increases but receive a large refund, you can adjust your tax withholding with your employer, he said.
This means you’ll see more money in your monthly salary, which could help as inflation continues. On the other hand, next year you might not get a refund at tax time or even owe the IRS.
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