Sky-high prices make it difficult for many Americans to afford expenses each month. Costs are rising for nearly every major expense, from housing and food to health care. Employee salaries are not maintained. It is becoming more and more common for the money that comes in each month to come out just as quickly.
Due to high inflation, the typical American household spent $445 more in September to buy the same goods and services than it did a year ago, according to an estimate by Moody’s Analytics.
Just under two-thirds, 63%, of consumers lived paycheck to paycheck in September, up from 57% a year ago, according to a new survey from LendingClub and PYMNTS.com. In the last year, salaries increased 4.9%, while inflation jumped more than 8.2%, according to the same report.
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Many people have to face difficult decisions to avoid blowing their budgets. However, “the more consumers buy judiciously, the harder it will be for companies to aggressively raise prices,” said Mark Zandi, chief economist at Moody’s Analytics.
Here are some strategies that could help you stretch your paycheck.
Be strategic when spending
To navigate higher inflation, you have to be a smart consumer. Start by tracking your spending and try to spend less or less often.
Always have a shopping list. When it comes to essentials like food, you may have already given up eating out. But eating at home is also more expensive than it was a year ago. When shopping for groceries or other essential items, always have a list. This makes you have to plan what you are going to buy before spending. Delay purchases a day or two. Take the time to search for the best deals and promotions, and get coupons before you buy. Also, waiting a couple of days can make you realize that the item you wanted was not an essential purchase.
A person shops at a supermarket as inflation hits consumer prices in New York City on June 10, 2022.
Andrew Kelly | Reuters
Cancel a monthly subscription. After setting up a monthly subscription (for cable TV or streaming services, publishing, gym memberships, or weight-loss programs), you probably don’t think about it, but that money keeps coming out of your bank account or being charged to your credit. card. Make it stop! Take a close look at all your subscriptions, then delete what you don’t really need.
Reduce your housing expenses
Housing is probably your biggest monthly expense and you may be spending more than ideal. Many financial experts recommend spending no more than 30% on rent, while lenders like you to spend 28% or less of your gross monthly income on housing costs to get a mortgage.
After nearly two years of record mortgage rates, the credit landscape has changed dramatically. The average rate on a 30-year fixed-rate mortgage jumped from an average of 4.14% in March to 6.92% in October, according to Bankrate. Therefore, refinancing may not be a viable option now.
Reduce electricity use. Shop around to see if there are utility providers offering lower rates. Even small changes can add up to big savings. Use low energy light bulbs. Do not run the dishwasher without a full load. Don’t leave the computer on. Lower the thermostat and/or install a programmable thermostat.
For homeowners:
Rent a room in your house. Check your state laws and your local housing authority to understand the restrictions and obligations. Homeowners associations may also have rules that limit rents, so understand those policies as well. Contact your homeowner’s insurance to make sure you can rent and what is covered. Try to get rid of private mortgage insurance. If you put down less than 20% when you bought your home, PMI is required. Once you have 20% equity, you can remove it. If home values have increased in your area, you may have enough equity to meet that 20% threshold. If so, ask your lender to cancel your PMI. They must comply if you are current and have not fallen behind on any mortgage payments.
For renters:
Consider getting a roommate.Negotiate for a lower rent. If you don’t ask, you won’t get it. Talk to your landlord. Be honest about your financial situation and suggest a monthly payment that you can afford. Offer to do the repairs yourself for a break in rent. Extend your lease at the current rate now, if rents in your area are expected to continue to rise.
The more judiciously consumers shop, the harder it is for companies to aggressively raise prices.
Mark Zandi
chief economist at Moody’s Analytics
Reduce credit card debt
Interest rates are at record highs and rising. The average annual percentage rate (APR) for someone carrying a credit card balance is 18.43%, according to LendingTree. Rates offered on new cards are even higher, at 22.21%, the highest since LendingTree began tracking in 2019.
Switch to 0% balance transfer cards: Interest-free periods of up to 21 months are still available, while most offers last 12-15 months. Just watch out for fees, which can range from 3-5% of the amount of money being transferred. “If you have good enough credit to get one, it’s the best weapon against credit card debt,” said Matt Schulz, chief credit analyst at Lending Tree.Ask your credit card issuer for a lower rate: About 70% of people said they asked for a lower interest rate on their credit card and got it, according to an April 2022 survey by Lending Tree. The average reduction was 7 percentage points.Consider debt consolidation: Making a monthly payment at a lower interest rate can help you pay off your debt faster. Talk to a credit counselor at a nonprofit agency for free to help you develop a debt consolidation or debt management plan. Find a counselor through the National Foundation for Credit Counseling at NFCC.org.
Take advantage of higher interest rates
If you have extra money left over after paying for essential household expenses, be sure to pay for it yourself. You can put that money to work for you with a high-interest savings account. The average rate on the highest earning online savings accounts is 2.34%, according to DepositAccounts.com, with some rates as high as 3%. So if you have extra money, save it.
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Source: news.google.com