Inflation continues to rise and does not appear to be slowing down any time soon. In September, consumer prices increased by 5.4 percent from September 2020, approaching a 30-year high. This means you’ll have to spend more on energy, housing, groceries, and other necessities. You’ll want to pay additional attention to how you spend your money as the holidays approach.
“Because of the holidays, people might feel even more inclined to spend money, so they should be more aware of the advertisements and push by the media to spend,” said Jamila Souffrant, creator of financial education podcast “Journey To Launch.”
Here are four tips to help you stay on track.
Assess the situation
Examine your entire financial situation before opening your wallet. This might assist you in determining which areas require the greatest attention and which areas provide some breathing room.
Add up all of your assets, including the money in your checking, savings, investment, and retirement accounts, as well as the estimated value of your home or other properties.
Then, add up the value of your liabilities, such as credit card balances, student loans, mortgage, and car loans. Where your finances currently stand lies in the answer to this equation: assets – liabilities = net worth.
Rework on your monthly budget
Try using a budgeting strategy called the “60% Solution.” The first 60% of your gross income (all of the money you have coming in for the month) goes to “committed expenses,” which includes all taxes, housing costs (rent/mortgage, utilities), credit card bills, and everything else that you must pay each month.
The remaining 30% goes to savings, with 20% going to long-term savings and 10% going to short-term savings, such as an emergency fund or a looming large purchase. The remaining 10% is your “fun money,” which you may spend on whatever you like.
Reconsider your expenditures
With the holidays fast approaching, it’s a good time to have an honest conversation with family, Souffrant said.
“Do a Secret Santa or agree to not buy gifts for everyone and just pick names out of a hat,” she said.
Determine whether you can purchase in bulk for any items so you aren’t continually spending as costs continue to rise. If you don’t require as many products, Souffrant proposes starting a mini co-op and splitting the cost and items among family, friends, and neighbors. If you have a long commute, consider carpooling to save money on petrol.
Look back on what gives meaning to your life and write it down to reduce your overall spending. Then look over your expenses to determine if there are any you can do without.
Another approach you can attempt is to eliminate at least one recurrent expense and save the money you would have spent otherwise. You might not need all six streaming providers right now, so cut it down to three. Put the “extra” cash in a separate account to be used for new splurges or spending goals.
Be conscious of your feelings
You may want to reward yourself for surviving the pandemic, but before you do, think about your purchase analytically before you put it in your cart, said Carrie Rattle, CEO and founder of Behavioral Cents in New York.
She says that you should consider whether you already have one, how often you’ll use it, and whether you’ve compared prices.
You may also be concerned about missing out owing to supply-chain disruptions, particularly during the holiday season. That can make you want to go shopping right now to make sure you acquire all of the gifts you desire for the holidays.
“The scarcity mindset can induce a level of shopping beyond necessary — securing all of those ‘just in case’ items without thinking through a plan,” Rattle said.
Instead, take considerable time to examine what you want to buy most, and have one or two backup options in mind in case your first choice isn’t available. Maybe you’ll end up giving some late holiday gifts to adult friends and family who understand.