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Inflation is rapidly raising the prices of energy, food and households that are key components of their monthly budgets. As wages have risen so rapidly over the years, it is becoming increasingly difficult to avoid a consumer financial crisis.
But according to financial advisers, there are levers that Americans can pull off – compared to their jobs, investments and spending – which may help.
Andy Boxley, a certified financial planner from Chicago at The Planning Center, says, “I’m comparing the situation to being at sea in a small boat in the middle of a terrible storm.” You have to control what you can control.
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“You can not control the storm or the sea, but you can control what you do with your little boat.”
The Consumer Price Index rose 8.5% in March 2022, the fastest 12-month increase since December 1981, the US Department of Labor said on Tuesday.
The index is a measure of the rising prices of U.S. goods and services. The price of a basket of goods, which cost $ 100 a year ago, averages $ 108.50 today.
The Department of Labor said petrol, shelter and food were the biggest contributors to rising prices last month.
Those categories have a huge impact on regular Americans: housing, transportation and food account for almost two-thirds of the average family budget by 2020.
“Householders have to work very hard [financial] Decisions are made day by day, “said Greg McBride, chief financial analyst at Bangkok.
Food, Energy and Home
In particular, “home-cooked” prices (i.e., grocery bills) have increased by 10% in the last 12 months, the largest annual increase since March 1981. The Department of Labor said costs had risen on all major food items.
Meanwhile, accommodation costs such as rent increased by 5% last year, the fastest annual pace since May 1991.
And household energy costs such as electricity and natural gas increased by 11.1% and 21.6%, respectively, over the past year. Meanwhile, pump prices have risen 48%.
Russia’s invasion of Ukraine in March was a major contributor to inflation, especially petrol prices. (Although oil prices have fallen recently, petrol has accounted for more than half of last month’s total inflation.)
McBride said Russia and Ukraine are major agricultural exporters, and their conflicts could at least play a small role in higher food prices.
But inflation in Europe was high before the war, and demand has been higher than supply since the start of the US economy in early 2021.
Initially, consumers had to spend a lot of money and global distribution chains could not keep up with it.
That dynamic still exists as Govt cases abroad lock up and stop production. Labor supply has not yet been fully restored, and businesses have raised wages to compete with workers; They can pass those labor costs on to consumers at higher prices, for example.
Inflation, which some economists are optimistic about, peaked last month. The so-called “key” inflation figures (which eliminate volatile food and energy types) fell for the second consecutive month, perhaps signaling the beginning of a broader decline.
“There are clear signs of a recession,” said Andrew Hunter, a senior U.S. economist with a capitalist economy. “But the economy is so strong that it will be high by past standards for the first 18 months of next year.”
There are a number of steps families can take to blunt the financial impact of inflation.
1. Ask for a pay rise – or switch jobs
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One, higher prices may obscure some good news for workers: the job market is hot. Jobs are at an all-time high, layoffs are near historic lows, and employers are raising wages quickly.
Instead of focusing on how much money is being spent due to inflation, Boxley said workers can make more money using their new foreign exchange.
Boxley said workers should ask for a pay rise or if their employer is unwilling to pay the increase, they should hunt for higher-paying jobs. This is a good time to negotiate work-related costs – for example, frequent work from home can reduce transportation time and thus petrol costs.
Taking home thousands of extra dollars at a salary can have a huge impact on the consumer base, rather than more effective actions such as buying generic brands instead of “premium” counterparts.
“Power has been transferred to employees in a key way,” Boxley said. “Take advantage of this rare moment and make sure you’re getting what you deserve.”
2. Save on a higher interest-bearing ‘I bond’
Second, consumers who save to buy over the next two or three years (perhaps with a car or home advance) can buy “I bonds.”
These investments, which are almost risk-free, pay a rising and falling rate according to the consumer price index, thus protecting the purchasing power of consumer savings, Boxley said. Investors can save up to $ 10,000 per year.
It should be separate from emergency savings because I keep your money locked up for at least a year, Boxley added.