In the last quarter of 2021, inflation increased at its highest rate since 1990.1 From gas prices to grocery costs to utility bills; many consumers are experiencing a serious case of sticker shock. Here are some steps you may take to manage the impact of inflation on your monthly budget.
Consider Long-Term Investments in a Diversified Portfolio
Investing in the stock market might be a way to mitigate inflation over the long term when compared to holding funds in a bank account. If the interest rates paid out by savings accounts and certificates of deposit (CDs) do not exceed the inflation rate, an investor is losing purchasing power for those funds. 2
Increase Your Income
One of the factors that may be contributing to the recent rise in inflation is a higher demand for employees and the associated increases in wages. If it was a while since your last raise, or if you are thinking of moving to another job, now may be the time to consider it. You may be able to command a higher salary than you may have gotten just a few years ago. If you are happy with your day job, consider freelancing or taking on a part-time or seasonal job to put a few extra dollars in your pocket.
Increasing your income may provide you with a bit more breathing room when it comes to managing your household budget/ Once you attain this higher income, it may be easier to maintain your lifestyle than trying to cut back on monthly expenses or avoid unexpected costs.
Manage Your Fixed Expenses
Although inflation is on the rise, mortgage rates and other interest rates may be fairly low. You may be able to refinance your auto loan, mortgage, student loans, or other fixed debt to get a lower interest rate or longer repayment term, managing the amount you must pay each month. By managing your fixed expenses, you may be able to stretch your monthly income further and account for higher costs in the future.
You might consider taking advantage of 0% interest offers for a credit card balance transfer or a furniture or appliance payment plan. Inflation means that tomorrow's dollars may be worth less than today's dollars. By paying for today's purchases with future-discounted dollars, you may get more purchasing value out of each dollar you now spend.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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