Inflation is quickly raising prices for households in core areas of their monthly budgets. Wages are rising at their fastest clip in years, but that makes it hard for consumers to avoid a financial hit.
According to financial advisors, Americans can pull levers relative to their jobs, investments and spending.
Andy Baxley, a Chicago-based certified financial planner at The Planning Center, likened the situation to being out at sea in a tiny boat in the midst of a horrible storm.
As inflation rises, where to find opportunities to make and save money.
You can't control the storm or ocean, but you can control what you do on your boat.
The Department of Labor said Tuesday that the Consumer Price Index jumped 8.5% in March 2022, the fastest 12-month increase since 1981
The index is a measure of the price of goods and services in the U.S. A basket of items that cost $100 a year ago would cost $108.50 today.
The Labor Department said that gasoline, shelter and food were the biggest contributors to rising costs last month.
In 2020, housing, transportation and food accounted for almost two-thirds of the average household budget.
Greg McBride, chief financial analyst at Bankrate, said that households are having to make very difficult financial decisions day in and day out.
Food at home prices are up 10% over the last 12 months, the biggest annual increase since March 1981. The Labor Department said that costs were up.
Shelter costs rose 5% in the past year, the fastest annual pace since 1991.
Electricity and natural gas prices increased in the last year. The price at the pump is up 48%.
Power has shifted to employees in a major way. Take advantage of this rare moment to make sure you’re getting what you’re worth.
The invasion of Ukraine by Russia contributed to inflation in March. The price of gas accounted for more than half of the overall inflation last month.
The conflict between Russia and Ukraine is likely to have a small role in higher food prices.
Inflation had been high even before the war in Europe because demand was out of supply.
Consumers had lots of money and global supply chains couldn't keep up.
There is still a dynamic as Covid cases abroad cause lockdowns and halt production. Businesses have raised wages to compete for workers and may pass those costs on to consumers in the form of higher prices.
Some economists think inflation peaked last month. The core inflation figure, which excludes food and energy, fell for the second month in a row.
Andrew Hunter, a senior U.S. economist at Capital Economics, said there seemed to be clear signs of a slowdown.
There are a few things that households can do to reduce the financial impact of inflation.
The job market is hot, but high prices may be overshadowing good news for workers. Job openings are near record highs, layoffs are near historic lows, and employers are raising wages quickly.
Workers can use their newfound leverage to make more money, instead of focusing on how much more money is being spent due to inflation.
If an employer is unwilling to pay a raise, workers should look for a higher-paying job. Asking to work from home more often can reduce transportation time and gasoline expenses, and this is a good time to negotiate work-related costs.
Taking home thousands of extra dollars in a paycheck will likely have a bigger impact on a consumer's bottom line than buying generic brands.
Power has shifted to employees in a major way.
Consumers who save for a purchase in the next two to three years can buy bonds.
These nearly risk-free investments pay a rate that rises and falls according to the Consumer Price Index and thus protects the purchasing power of consumers. It is possible to save up to $10,000 a year.
Since I bonds lock up your money for at least a year, this should be a separate bucket from emergency savings.
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