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If you feel like your budget is tight lately, there’s good reason for it. As of January 2023, the U.S. annual inflation rate remained at 6.5%. While this is lower than the 9.1% peak reached in June of 2022, it still means nearly everything you regularly purchase is more expensive than it used to be.
According to findings from FNBO’s ‘2022 Personal Finance Snapshot Survey,’ 67% of Americans say inflation has made it difficult to afford basic needs. It’s not difficult to understand why. The U.S. Bureau of Labor Statistics reports that compared to a year ago, food costs increased by 10.1%; energy costs by 8.7%; rent by 8.6%: apparel by 3.1%; and medical care costs are up 3%.
There’s a pretty good chance your salary has not increased at the same rate as inflation, so it’s no wonder your budget may be struggling to keep up! Only time will tell if or when these prices will start to come down. In the meantime, how can you avoid spending more than what is in your bank account? Start by following these seven tips to help you more easily afford things you need.
1. Eliminate unnecessary expenses.
Look at your weekly and monthly expenses and see if there is anything you can cut out. Do you have a monthly subscription that you can eliminate such as a video/music streaming service, monthly beauty box, or unused health club membership? Do you pay someone to clean your home or take care of your yard? Consider doing these things yourself until prices start to decline. If you work outside your home, pack a lunch from home instead of going out to eat. Cutting out even the smallest expense can really add up over time.
2. Shop for groceries differently.
Adjusting how you shop for groceries can make a big impact on your wallet. For instance, if you normally purchase name brand products, try opting for the store brand or generic versions of the same product. Doing so could save you 20-25% on virtually the same product. Instead of purchasing fresh fruits, vegetables, and meats, consider purchasing the same items from the frozen foods department. They are just as healthy, last longer, and could cost you up to 50% less.
3. Reduce your home’s energy bill.
The cost of keeping the lights on, the water flowing, and the temperature comfortable can really add up. Making small tweaks to how you consume energy in your home could reduce your total bill by as much as 25%. Some simple things you can do include fixing drafty doors and windows; turning the thermostat up a few degrees in the summer and down a few degrees in the winter; swapping out incandescent light bulbs with led lightbulbs; purchasing energy-efficient appliances; taking shorter showers; washing clothes in cold water; and fixing leaky faucets and duct work.
4. Don’t waste gas.
Depending on the type of vehicle you drive, a tank of gas could currently cost you $50 to $100 or more! You can help make each tank last longer by planning your trips and errands efficiently. Instead of going to the grocery store daily, try making a list of items you need for the week and make one big trip. If you need to complete multiple errands, map out your stops in the most efficient way possible to conserve gas. Consider reducing your speed by 5 to 10 miles per hour when you drive. Doing so can improve your fuel economy by as much as 14%. Also, turn off your car while waiting in the school pick-up line. An idling car can use up to a half gallon of gas per hour!
5. Pay off your debt.
Eliminating your monthly debt obligations from past purchases will leave you with more money to pay for the things you need and want today. It’s important to make at least the minimum payments on your balances each month but paying more than the minimum will help you pay off your debt faster. Also, be sure you don’t incur more debt by using cash to pay for things.
6. Increase your income.
Increasing the amount of money you make each month is another way to cover the rising cost of goods and services. Consider asking your current employer for a raise. The worst thing they can say is no. Or maybe you have a hobby that could be turned into a profitable side hustle. Another way to put more cash into your wallet is to sell unused items that are laying around your home collecting dust.
7. Keep saving for the future.
While paying for the things you need today has become more difficult, it’s still important to invest in yourself by saving for the future. Most financial experts agree you should have three to six months of living expenses set aside in an emergency savings fund to cover unforeseen circumstances such as a job loss, health issue, or home repair. If you don’t currently have an emergency savings fund, start building one now. Even if you can only afford to set aside a small amount each month, your savings will really add up over time. Then, be sure to increase your savings amount as you can afford to do so.
If you have questions about your budget, a Personal Banker from FNBO would be happy to answer them. Give us a call today.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.