Over the past year and half, inflation has been everywhere. Whether it be the conversation around it or the actual pain in the pocketbook of the price increase, it has become an unescapable part of our lives in a way that we have not seen for decades. We would have to go back to the 1980s to find inflation numbers around what we are experiencing today.
While the government is taking steps to help bring down the average inflation rate, their actions through federal interest rate hikes may take months and months to work their way into the economy. With that in mind, it is important that we all remain good financial stewards to ensure our decisions today do not negatively impact our goals for the future.
Knowing that we are now paying more for just about everything we consume, it’s time to make sure that these price hikes aren’t becoming the silent killer to your financial success.
We recommend that people create and regularly review a family budget. While over the past few years the prices of goods remained consistent enough that you may have seen little to no change to your annual expenses, that is no longer the case. The pain may be felt the worst when grocery shopping. In 2022 food prices surged by an average of 9.9%!.1 To translate that into real dollars, if your annual family budget for groceries is $10,000 per year, you are now paying $10,990 for the same items. The additional money that you are spending is coming at a cost from somewhere else. It may be your surplus money in a bank account is a little bit less each month but what we really want to avoid is the inflation costs preventing you from contributing to your retirement accounts or carrying the extra cost on your credit card balance.
The elimination or reduction of savings or accruing large balances with high interest on a credit card can be detrimental to your financial success. A budget can help keep your spending in line with what makes sense given your income and it is also helpful in identifying unnecessary spending that can be eliminated to help account for the additional costs that inflation is imposing on everyone’s budget these past few years.
Creating a budget does not need to be complicated or overwhelming. You can always begin by selecting the top 3 or 4 largest expenses in your household and track what you spent on them over the past month. There are several softwares available to help you create a budget but if you are not inclined to pay for assistance, a simple excel spreadsheet or our Cash Flow Worksheet is available to you. And as always, your wealth advisor is here to assist you in guiding you to financial success!
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Source
1.https://www.ers.usda.gov/data-products/food-price-outlook/summary-/#:~:text=In%202022%2C%20food%20prices%20increased,by%20more%20than%205%20percent