Spending more and saving less: Time for an inflation check-up (From Ally Financial)
~ Saturday, October 1, 2022 Blog Post ~
Welcome to Money Moves. I’m digging into all things money — moves that can impact you, links and insights.
What Happened:
Inflation is officially the top concern of most Americans. Higher prices have already overstayed their welcome, especially with the cost of gas and food seriously cutting into our budgets. In May, gas prices were up almost 50% year over year and food costs increased around 10%. Add to that the 20% increase in hotel costs and 38% increase in airfare and it’s a lot to digest as the summer gets underway.
Dipping into savings for everyday expenses is not ideal. While it feels as though inflation will continue marching higher, spending more and saving less means that many people could be faced with solving a short-term problem by chipping away at the solid financial foundation they worked hard to build in recent years.
Why It Matters:
Let’s remember that over the past two years, the collective wealth of the bottom 50% of U.S. households has almost doubled, making a small — but positive — dent in the country’s inequality gap. Consider what that means. People who didn’t have savings before were able to put some money in the bank. That’s huge. Savings rates spiked across the board early in the pandemic and stayed high for some time, giving people the opportunity to build a solid financial foundation.
If you were part of the group that saved more over the past few years, it probably feels strange to have to tighten your belt. In fact, our survey results showed that many are not willing to give up spending on family and friends, back to school, weddings or their home. The “great reprioritization” made many of us reevaluate where and how we spend — especially when it comes to experiences and loved ones. It’s okay to draw that line, but you need to be ready to make decisions about where you are willing to cut.
What It Means for You:
These days it’s all about trade-offs and compromises that help you maintain your financial footing the best you can. With food and gas creating the biggest dents in budgets, you’re probably already trading down on brands, shopping at discount stores or substituting cheaper grocery items. Other ways to take control of higher costs are to talk to your employer about working from home an extra day or two to save on transportation costs or consider vacationing locally this year. If cutting back isn’t an option, consider finding new streams of income: a side gig, selling items you no longer use or renting out extra space in your home. Every little bit helps.
Remember: this too shall pass. Even if it doesn’t feel like it at the moment.
In the meantime, keep yourself motivated by remembering the goal. You worked hard to build those savings — don’t let inflation undo it. It won’t be easy but taking the time now will ensure you maintain your financial health for years to come.
Check out what else we’re reading this week.
- Inflation weddings are a challenge for many aspiring couples. Check out these tips for navigating nuptials in 2022.
- Wondering if renting or buying is right for you? It likely depends on your location.
- Dreaming of a sandy getaway but need to cut costs? Check out these seven beach swaps to get more bang for your buck.
Have comments or questions? Post a message below.
Lindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience.
Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank.
She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider.
She also serves on the board of Better Investing, a non-profit focused on investment education.
