This is an article “Why US Households Are Spending $300 More In 2022” by Marc Primo
Everyone knows that inflation will continue to balloon as it has drastically done since the middle of 2021. Worse, everyone can feel the cost of living also rising quickly to alarming heights. Many folks are certainly digging deeper into their piggy banks to keep up with the times and survive each passing month.
But what about those people who don't have any cash on hand? The more inflation grows, the more people get trapped in dangerous debt situations. With how the pandemic and the current conflicts in Europe contribute to raising the prices of essential needs in the market, more people need to figure out alternatives to either cut down on expenses or earn more—especially for low-income families.
Know the numbers
Moody's Analytics tells us that the average American household needs to shell out $300 more each month for expenses. That extra budget is consistent with the most recent Consumer Price Index measurement, which showed an annual increase of 7.9% in February. For the average American, it's safe to say that things can get a whole lot worse before the economy gets better.
However, the inflation problem is not only exclusive to low-income families. Wells Fargo recently reported that middle-class consumers have also experienced an inflation rate half a point higher than those on the lower end of the spectrum. Generally, US families are spending 7% more than they did last year for the same amount of the same brands they purchased in the market two years ago, and for the wealthier households, that number is close to 6%.
Below are a few tips that can help you weather the inflation storm and avoid a pile of debt on your hands:
Cut down on housing costs
While cutting back on costs, it's important to note that you might not be able to reduce certain living expenses. Suppose you need to feed your family. You can undoubtedly try buying less expensive items. However, it doesn't change the number of goods you'll need for a month, and your savings won't be that too substantial. The same goes for your daily drive to work. You can only cut down a small amount from your gas consumption no matter how hard you try.
One way to significantly cut down on your monthly costs is by spending less on your housing expenses. You could even free up more cash to pay for your other bills in the long term. For example, you are renting a place and living alone. If your place is good enough for two, you might want to consider getting a roommate who can share on costs.
On the other hand, there's always the option for families with a home to rent out a separate space within the property for more income. These days, having other people share mutual expenses gives you more leverage to hike your budget for other essential needs like food and gas.
Another way to cut down on costs is by getting your mortgage refinanced, especially if you are qualified for lower rates on your home loans. Since mortgage rates remain relatively competitive, now is a good time to do so.
Only spend on essentials as much as possible
It's pretty easy to distinguish between necessities and non-essentials in the household. Your family needs food on the table while the car needs fuel so you can go to work. That said, you could probably suspend your Netflix subscription like some 200,000 users of the streaming service have already done when money became hard to come by, right?
Two of the easiest things we can temporarily cut back from to save money are leisure and entertainment. With multiple monthly expenses to take care of, adding them up with such non-essentials will only increase your credit card bills.
Try sorting out what other things you can momentarily do away with or cut back on in the household, such as app subscriptions, water usage, or air conditioning. Optimize how you use your appliances so they don't accumulate in your electric bill.
Join the Gig Economy
These days, it's common for most people to take on second jobs to increase their monthly take-home pay. The country's gig economy has also been thriving in recent years so you may want to find a suitable second job that can help you earn more.
With the magic of technology and the internet, you can easily enroll in free online classes and enhance your skills to take on service-oriented jobs such as freelance writing and graphic design, or even odd jobs like dog sitting or signing up to be an Uber driver. Most freelance jobs are done remotely and will give you flexible time, so there's no need to worry if you are taking care of your child at home most of the time.
Right now, the average American family is struggling with inflation rates and making sacrifices like having a second job which can be helpful and fulfilling.
Keep a weekly budget
The faster prices increase, the quicker and more regular you should also act on your monthly budget. Reviewing where your money should go every week is ideal nowadays, according to money expert and personal finance blog Poised Finance Lifestyle creator Sahirenys Pierce. Doing so will allow you to figure out which household costs you can further allot lower budgets to and which services you can scale down, such as insurance.
Having a weekly budget will also let you monitor how you can conserve your energy consumption by up to 10%. Doing little things such as unplugging unused appliances or using power strips for your switches will increase your savings significantly over a month.
Plan ahead of the challenges
Planning and making strategies such as making one-way trips to the market or even as simple as making a weekly meal plan will do a lot for your piggy bank. As you go along with your budget plans and weekly review, nurture the discipline to stick to your goals. Even when the going gets easier, try developing a new lifestyle that saves you more money rather than one that gets you to pay for more non-essentials you don't need.
Expert financial planners will tell you that these minor adjustments in your daily plans work in the long run, but the key is to stick to your schedule religiously. Along with inflation, the pandemic and the ongoing war in Ukraine are also adding up to higher prices. Without making the necessary sacrifices to cut back on expenses, it's difficult for anyone to achieve the 'American Dream' under the present circumstances. Fortunately, there are still ways like those mentioned above in which we can try to minimize our monthly spending without letting inflation drastically affect our families' way of life.