Is Inflation Taking a Toll on Your Wallet?

According to the U.S. Bureau of Labor Statistics, consumer prices are up by 8.2%ˡ. In dollars, that means, most consumers are now paying an additional $445 more per month for goods and services, like groceries, rent, and healthcare². Of course, this amount varies by region and what items are being purchased each month. If you’ve been to the grocery store recently, however, you’re probably already aware that inflation is high.

Charles Claver, Senior Vice President, Director Investment Management & Trust and Family Wealth Advisor for First Bank Wealth Management, commented, “While we have experienced inflation at levels we haven’t seen in four decades, it’s reasonable to believe that such periods of off-the-chart inflation are often temporary in nature and considered short, when looking at it from a long-term perspective. The Federal Reserve is determined to bring inflation to its long-term average of around 2% - 2.5% and what they have done, thus far, in 2022 demonstrates their laser-focused approach to achieving this goal.”

Until then, however, what can American consumers do to ease the pain on your wallets?

Develop a Sound Budget

There are a number of ways in which consumers can survive record inflation. First and foremost, devise a strategic budgeting plan. When you think of a successful business, you’re probably aware that developing an annual budget is part of the standard operating procedure, so why should a household’s finances be any different? After all, managing a household efficiently is just as important as running a business.

Getting organized and creating a monthly budget gives consumers an opportunity to examine spending categories, like discretionary spending, that can possibly be reduced or reallocated. This is a good time to review everything from weekly grocery and entertainment expenses to monthly cable and insurance premiums. Become a savvy, informed consumer.

Read more at “Establishing a Budget.”

Get Strategic with Savings and High-Interest Debt

Being smart with your money has never been more important. Once you’ve paired down your expenses, you’ll want to start paying down higher-interest debt as well as building up an emergency savings.  Of course, regular, automated contributions to a standard savings account is a time-honored approach; however, it may be a good time to consider adding a Certificate of Deposit (CD) to your emergency savings plan.

If you’ve never saved by using a CD before, there are many reasons to consider this option, including:
1. Enjoy the flexibility of choosing your investment period.
2. Open an account with as little as $1,000.
3. Earn more than traditional savings accounts.

Open a high-yield CD account online today.

With rising interest rates, it’s possible your credit card’s borrowing rate has gone up as well. This means you’ll pay more each statement cycle on balances you’re carrying when using your credit card. Take the time to review what your rates and balances are for all of your consumer (or non-mortgage) debts.

Consider finding lower-rate alternatives, like a home equity line of credit, in which to consolidate high-interest consumer debt. You could even transfer the balance to a low, introductory rate credit card.

Review Your Long-term Goals

Once you’ve examined each of your expense categories and high-interest debts, you’ll then want to review your long-term savings goals. “Clearly, investors are worried about their ability to maintain their purchasing power in this environment,” continued Nicola, “especially, if they are retired or are about to retire, and become dependent on their nest egg of retirement savings to support their retirement. The most crucial advice I would offer is to not make long-term predictions and decisions based on short-term market disruptions.”

He went on to explain that the worst asset to hold during high inflationary periods is cash. “Consult with your trusted Financial Advisor on where you could deploy any excess cash into inflationary-hedged investments to maintain your purchasing power, not only over the short or the intermediate term, but rather the long term and throughout the retirement phase.”

It’s easy to review your retirement nest egg and savings strategy. Schedule a Portfolio Review today.

If inflation is taking a toll on your wallet, and you would like to discuss your options, including taking advantage of higher returns with a CD, consolidating your higher-interest debt with a HELOC, or reaching out to the trusted advisors at First Bank Wealth Management to discuss your portfolio, schedule an appointment today!


ˡU.S. Bureau of Labor Statistics, September Inflation Report, 2022
²Another Ugly Inflation Report, Moody’s Analytics, October 14, 2022