Usually, inflation isn’t too bad. In the past decade, for instance, prices have risen by less than two percent a year.
In the wake of the pandemic, however, prices have risen about 5 percent over the last year. That’s enough for most people to notice that their paycheck won’t go as far as it used to, and unfortunately the less you make the more you’ll notice this.
Review and Adjust Your Budget
When you know prices are going up, the first thing you should do is review your budget. Take a look at your categories and add about 5% to all of the "necessity" categories, such as food, mortgage or rent, utilities and gasoline.
Once you've increased your "necessity" categories, you'll need to lower the amounts of your other budget categories by the same amount. If you have any budget categories where you consistently underspend, you may want to target those first.
Be a Smart Shopper
One of the best ways to stop inflation from eating away at your bank account is to shop strategically and look for ways to save money. Buying company brand or generic groceries instead of name brands, for instance, can reduce your grocery bill by up to 30%.
You can also save money by buying secondhand items instead of new ones. Thrift stores like Goodwill have incredible deals on everything from kitchenware to clothing, while sites like Facebook Marketplace and Craigslist can give you access to some incredible deals on everything from appliances to furniture.
Lock in Low Interest Rates
When inflation rises, it’s not uncommon for the Federal Reserve to raise interest rates to slow it down. In other words, if you’ve been thinking about taking out a loan, you might want to act quickly, before the Fed raises the rates.
You’ll also want to take advantage of low fixed interest rates if you have any debt with a variable interest rate, like a mortgage or a credit card. Refinancing your mortgage into a fixed-rate loan or taking out a fixed-rate consolidation loan for your credit card debt could end up saving you a lot of money.
Make your Paycheck go Further With First Alliance Credit Union
Inflation can seem scary, especially when you realize your paycheck won’t go quite as far as it used to. However, you can protect your finances against inflation. You can prepare for the increase in prices by making sure you budget is up to date and by shopping strategically, and you might even save money if you take advantage of the low interest rates for fixed-interest loans.
If you need help in making your paycheck stretch further, become a member of First Alliance Credit Union today. You can use our robust online banking platform to effectively manage money, especially with the My Money tool, which makes budgeting easy. We also offer guides in our resource center that will help you do anything from paying off debts to building up your savings account.