Home Consumer debt Ways to avoid crushing debt in a time of runaway inflation

Ways to avoid crushing debt in a time of runaway inflation

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Dedication to being mindful of spending you can control may be key to surviving record inflation and rising gas prices.

BUFFALO, NY — There’s an old adage when it comes to losing weight.

The equivalent with your money can be spending less to get more.

While we can control how much we eat and how much we exercise, when it comes to our wallets lately, it’s harder to spend less when everything costs more.

Costs for gas, food and other basic necessities surged in May, pushing inflation to a new four-decade high and giving U.S. households no respite from rising costs.

The Labor Department said Friday that the consumer price index, the key indicator of inflation, rose 8.6% in May from the same month a year ago, marking the figure the highest since December 1981.

At the same time, the national average for a gallon of unleaded gasoline is approaching an unfortunate milestone of $5 a gallon.

“It’s disheartening to know when we (as individuals) can’t control some of the prices of these things,” said Robert Dunn, vice chairman of the board at Buffalo Consumer Credit Counseling Service.

As they look to meet their monthly obligations such as mortgages and rent, consumers find that the cost of food on their table, gas in their tanks and clothes on their backs rises with the cost of almost everything else.

The dollars they earn lose value.

“And then you’re struggling to make ends meet and you’re not able to save, and that starts to worry you,” Dunn said.

Although her nonprofit agency primarily helps those already struggling with debt, she offers advice for those who fear they may soon become so, if things persist and the trend continues.

The first step, Dunn says, is to assess your expenses.

“If you don’t have a budget right now, now is the time to create one,” he said. “We need to start creating spending plans and we need to not only have them in mind, but actually have a written document.”

Once you put your mind to it, Dunn said, it’s easier to see precisely how they’re spending their money and what expenses they can reasonably afford.

“You may not be able to save money right now on groceries and gas, but you may be able to save money on restaurant meals by cutting down on your consumption. .”

If inflation leaves you strapped for cash, you may be able to get more at your job without asking for a raise by adjusting your withholding.

“A lot of people get big tax returns… now might be a good time to take a look at your tax deductions to get some more money right now on your paycheck that could cover higher expenses. You need to assess whether the $5,000 you might receive next April from a tax refund is more beneficial to you right now to cover those expenses.”

Increased cash flow at a time when you’re paying more for the cost of living could keep you from falling behind on bills and other monthly obligations.

It also appears some have misunderstood that federal student loan repayments remain on hold for the rest of the summer.

“Some people keep paying them back, and it’s understandable that some want to do that if they can. But there’s no interest on federal student loans, so maybe it’s time to stop. your payments and use those funds elsewhere if you need them,” Dunn said.

In addition to soaring inflation and record gasoline prices, interest rates are also on the rise, with mortgage rates approaching double what they have been since their all-time high in January 2021 when Joe Biden sworn in as president.

“Interest rates not only impact mortgage rates, but also auto loans and credit card rates, so the cost of having credit card balances from month to month ‘other is going to be a lot more expensive,’ Dunn said.

This could be especially troubling for those who may end up carrying additional credit card debt due to inflation.

Indeed, a new study from WalletHub indicates that the average household credit card balance is 12% higher than this time last year, and projects that Americans’ credit card debt will increase by 100 billion by the end of this year.

And as purchasing power declines with current inflation, dollars saved, especially in retirement accounts, are shrinking amid falling stock markets.

“I think people will see themselves maybe in financial difficulty for the rest of the year and maybe next year,” Dunn said. “We expect to be very busy for the foreseeable future, but are ready to help out when we can.”

Interestingly, Dunn has seen his credit counselors get busier when times are good economically, when people tend to be freer with money and sometimes get into trouble, as opposed to now, when many can spend more carefully.