budgeting, finance, financial education, financial wellness, money, money management

Let’s Talk Inflation

You’ve probably heard a lot about inflation over the recent months, but do you completely understand how it affects your wallet? In a recent article from CNBC, the inflation rate for the month of November was 6.8%. When we take a look at the Federal Reserve’s predicted rate of inflation, it usually is around 2-3%. The predicted rate of inflation is a range that economists use to monitor the rate of how prices increase in the economy.

So the real question is, what is inflation? According to Investopedia, inflation is the steady increase in prices for goods and services over a period of time. When inflation increases, our purchasing power decreases. Unfortunately during a rise of inflation, the value of our money goes down. The value of our dollar decreases because consumers tend to spend more on goods that are slow to lose value.

Another perspective to help with understanding inflation is supply versus demand. The Federal Reserve is the controlling body of when and how much money is printed and inserted into our economy. In November, the Federal Reserve printed $105 billion dollars and inserted it into the U.S. economy. The printing and placing of dollars in huge amounts has a negative effect on our money as consumers- the value goes down.

Since September, prices of goods and services has drastically increased. In a recent article from CBS News, the percentage increases among some popular food items was outlined:

  • Beef- up 20%
  • Bacon- up roughly 28%
  • Chicken and Fish- up 11-14%
  • Eggs- up 29%

It can be scary when we think about our personal finances and how to handle the sudden increases in many products we buy regularly, but here are 4 ways to help protect your financial well-being:

  1. Complete a 1-hour budget review, “Two Sense Analysis”, to assess your expenses and income. Simple way is to create two columns: left side for your expenses and the right side for your income. When completing your income, please include ALL income from ALL sources. Doing this budget review will help you see what categories you can afford to cut or decrease and which ones you need to re-allocate funds to.
  2. Find a way to increase your income- Do you have a side hustle that you can monetize? Another way is to apply for a seasonal Part Time job, especially because this is a great time of year where retailers are seeking help. If you are currently employed and your company is short-staffed, ask your manager if overtime is possible.
  3. Based on your budget review, plan to start or revamp your savings- For those who do not have an emergency savings, now is the time to see how you can start one. Starting a savings plan, with even $100 a month, can be a huge help in the event of any unexpected situations. With the sudden increases in prices for so many goods, having a savings set aside can really come in handy to use as a buffer if you need to access it for your essentials. If you already have a savings plan, take a look at your budget analysis and see if you can increase your budgeted monthly contribution.
  4. Plan Ahead! Whether you are planning to make a large purchase in the near future, such as a home or car, please take into consideration the effects of inflation on your budget. If you are saving to buy a home, expect to save a little more or to pay increased fees for closing. Planning ahead regardless of the scenario is always going to come in handy financially.

If you want to hear more about inflation, tune into my latest episode!


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