Consumers are under pressure like never seen in almost 40 years. I am seeing it more and more, and it is very concerning for millions. To combat high levels of inflations, many consumers have resorted to credit card and other consumer debt trying to navigate through these record inflation rates. Every person has an opinion. What can you do more? Here are some ideas that I have helped out many others over the last 30 years.
A few years ago, I was asked to meet with an older husband and wife who were trying to right-size their finances. He was spending a lot of money and she was trying to save money to prepare for retirement. I never like to get in the middle of a couple’s fight on finances, but I will give suggestions and the couple has to find the best path forward.
I went through the previous two months of credit card statements. There were a lot of drinks at the local gas station, an elevated cable bill, and some items for hunting. It went further – there was much more. After each charge, we either acknowledged its purpose or I asked questions to that charge and identify if it was a need or something that could have been done without.
Today, the economy has changed from 18 months ago and the stress for many families is really high. With the Biden administration telling Americans they are doing everything to bring down high prices, and then saying there is not a lot that they can do, it leaves most Americans feeling hopelessly desperate. An investment advisor along with a business reporter both told me the same thing this past week; markets have lost confidence in the ability of the Biden administration and the Federal Reserve to bring inflation under control. That is very concerning. We could face this crisis for another year or two.
What can you do? Start with your credit card bill. Be honest and go through each transaction for the last 60 days. Separate them into categories and total them. Identify what areas can be reduces. Can you avoid extra drinks at the gas station, lower your cable subscription to a basic package, reduce your auto insurance coverage by raising your deductible or park a car and not drive it? Drive the vehicle that gets the best gas mileage even if you don’t have the room of a SUV or minivan? Can you look to purchase in bulk for group savings, reduce your extras at the grocery store?
Most consumers can lower their expenses by 10-12% without a lot of sacrifice. Find areas to reduce your outgo. Don’t keep adding more charges to your credit cards – doing that will just reduce your future purchasing power.
If you need to reduce 20-25% of your expenses, that is going to take more effort and discipline. You should watch every dollar expended.
Whatever your situation, others are feeling it too. Stay above water, don’t go down the easy road of more consumer debt. Have a real good financial review with yourself. It is the easiest method to fight against the high costs we see today. Then, create a plan and follow through on it. Give yourself some room in case of an unexpected expenditure.
There will be better days. We just don't know when. For today, those that are more financially disciplined will be much better off tomorrow.