The year is 1974. All in the Family is the most-watched show on television, and the Oakland Athletics have just beat the Los Angeles Dodgers in five games to win the World Series. And in Washington DC, President Gerald Ford is addressing congress. In his speech, he declares that America has a new enemy. "Public enemy number one." he declares. This new enemy is inflation. But fear not, because President Ford has a plan to "WIN." Whip Inflation Now.
The WIN campaign was an ambitious plan from the United States government to combat inflation. Citizens would take a pledge to control their spending, and President Ford would mail them a nifty button as a reward. While history would come to see the campaign as a bit of a dud, there are some key ideas and themes we can implement today as inflation marches higher.
Retool Your Budget
When thinking about the best way to fight inflation at home, your household budget should be one of the first things you review. First, consider your household expenses and see what your family can cut back on or eliminate.
From large expenses, like lawn care or cleaning services, to smaller items, like clothing and entertainment costs, you more than likely have some wiggle room in your budget to cut back during times of high inflation. Spending a few hours and sitting down to go line by line through your household budget could save you a lot of money. Aside from helping offset the cost of inflation, a semi-annual review of your household budget also helps keep your family financially grounded. Do you really need that Netflix subscription year-round? Or should you only subscribe for the one month of the year you binge-watch Stranger Things and The Crown?
Pay Down High-Interest Debt
Again, this should be done regularly, inflation or not, but it is critical during times of high inflation. Raising interest rates is one of the tools the Federal Reserve is currently using to fight high inflation. When the Federal Reserve raises rates, they raise the "prime" interest rate. This is a rate that banks use to lend money to most customers.
However, when determining interest rates for credit cards, many credit card companies charge the prime interest rate plus an additional interest rate. So when the Fed raises the prime rate, those carrying large credit card balances are some of the hardest hit.
The same goes for those carrying a lot of student loan debt. For example, if you have a variable rate on a private student loan and are still paying off the interest (or haven't paid at all), the slightest rise in interest rates can significantly impact how much more you owe on your loan.
As inflation grows, it is critical to prioritize paying off high-interest debt. So get out ahead of rising rates if you can.
Shop Around and Compare Prices
This one seems simple, but as we fall into the routine of daily life, it's easy to forget to shop around for a decent bargain. For example, maybe the grocery store your family uses regularly is on the way home from work, so it's convenient. But is it the best deal you can find?
Something as simple as finding ways to lower your household food costs can have a large impact on your finances during times of high inflation. While prices are rising everywhere, not all price hikes are created equal. So while your grocery bill at the Kroger that you frequent because it's on the way home may have gone up by 15%, maybe prices at the Aldi located a half mile out of your way have only increased 6%. And while it can be difficult to change your daily routine, the money you save may be well worth the hassle.
The same goes for car insurance. Did you know the longer you stick with your car insurance company, the more they could be charging you? Unfortunately, many car insurance companies see loyal customers as easy pickings. So they steadily increase your rates month after month, year after year. And like the frog in boiling water, you are none the wiser.
Now is an excellent time to jump out of the pot and shop around for a better car insurance rate. You could find your current provider has been taking advantage of your loyalty, and another company may be willing to give you the same coverage (or better) for less. And even if you love your current car insurance company, take that new lower rate from their competitor to them and ask if they can match it.
Hold Off on Large Purchases
As many of us know, purchasing and financing a home today will be much more costly than just a year ago. Soaring inflation and rising interest rates make taking out a loan on something like a house infinitely more expensive and could even push that dream home you've had your eye on out of your price range. But what about purchasing other items?
How about your car? Maybe it's 12 model years old and starting to show its age. Maybe it rattles a little when you turn the engine on, and the heater just doesn't get the entire car quite as warm as it used to. While you may think it's time to go shopping for a new set of wheels, you may consider sticking with your current car just a little longer.
Like when purchasing a home, financing a car during a time of high inflation and rising interest rates could cost you thousands more. A car payment that two years ago may have been only $400/month could easily be $500+/month for the same car at the exact same price. That should be enough to cause you to think twice. Maybe that old car has another 50,000 or so miles in it.
Negotiate a New Salary
Up to now, we've focused on controlling expenses during times of high inflation. But what about the other side of the balance sheet? Can you increase your income to combat inflation? As the saying goes, "If you don't ask, you don't get."
As the end of the year approaches, now is a good time to think about how to discuss a salary increase with your employer. Most employers know that inflation impacts their employees, and many have found companies more than open to wage increases during this time. Be open and honest with your employer when negotiating, and be reasonable with your expectations.
While the 1974 "WIN" campaign may have ended with a whimper for President Gerald Ford, its central message remains true today. When inflation starts to creep up, take a look at your budget and finances and make the necessary moves to offset rising costs. While you may be unable to control how high the interest rates climb, you can control if you purchase that new car or home.
Schedule a Consultation
We have helped our clients answer these questions and more. If you want a clear understanding of your financial future, and need help making changes to reach your goals, schedule a consultation and we can get started.
