Inflation: a third of Americans dipped into their savings – how to avoid it

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This year’s inflation undid last year’s stimulus for much of the country as rising prices forced people to loot the savings accounts they created during the pandemic.

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According to a GOBankingRates study of 1,000 adults, more than one in three people – 35.54% – dipped into their savings because their money allowed them to buy less gas, food and everything else months later. month.

Only 18% of people aged 55 to 64 dipped into their savings, the lowest percentage of all age groups. The worst off are the youngest adults: 52% of 18-24 year olds have dipped into their emergency fund to cope with rising prices.

The whole point of saving money is to get you through tough times like these; but, with a recession looming, you’ll want to keep your financial cushion as inflated as possible so it’s there when you really need it.

GOBankingRates asked experts from various fields to share their top strategies for surviving today’s high inflation without plundering your savings account. Here’s what you need to do.

Put everyone on the same page

Step 1 is to discuss the topic with your household. Be open about your financial plans and how you will adjust your budget to pursue them.

“Get aligned on overall life goals with your partner and/or family,” said Tanya Peterson, consumer credit expert and vice president of branding at Liberty Financial Network. “It’s not an easy task and it will take careful thought, time and compromise.

“Important goals might be taking a vacation, buying a new TV, retiring, and having enough time to pursue a hobby or interest each week. Whatever they are, big or small, once you can define them and agree on them, you can create a budget that prioritizes goals. Then turning off some items on the next trip to the grocery store, or turning up the thermostat to save on energy bills, won’t seem so difficult when you know why you’re doing it.

Start tracking your expenses

The next step is to start doing what you should have been doing all along: tracking your expenses.

“Especially as inflationary pressures increase, staying organized and aware of your financial situation is key to building financial independence and overall happiness,” said Lisa Fischer, director of growth and lending at the fintech company. Path of missions.

You can use a spreadsheet or an app, and there are endless strategies and methods, but all budgets start the same way.

“The first thing an individual should do before allocating their monthly budget is to list all the expenses they pay for in a month,” said Sarah Ross, financial advisor and co-founder of CocoLoan. “Classify each as essential or non-essential so that the degree of necessity can be determined.”

Ross suggests listing expenses according to their urgency.

“During a tight budget, there are expenses that are necessary but not immediately necessary, so you can delay them for a while,” she said. “Carefully categorize and allocate your money at the top of the list. If there’s still excess money, you can include those not-so-essential expenses, or better yet, save it for future rainy days.

Now the hardest part: spending less

Unless you can make more money, you’ll have to cut spending to avoid plundering your savings, as inflation continues to erode the purchasing power of the dollar. The first place to cut the fat is probably the recurring bills you’ve set on autopilot.

“I would review every subscription and every automated payment,” said Chris Kampitsis, CFP and financial planner for the SKG team at Barnum Financial Group. “From cable to streaming, from gym memberships to phone apps. Most people would be surprised to find out how much money they can save by cutting the costs of services and programs they no longer use or by switching to less expensive alternatives.

Kampitsis also recommends capping what he calls “discretionary spending.”

“Birthdays, weekend dinners, vacations,” Kampitsis said. “While last year you may not have been so conscious of your spending on these ‘unexpected’ discretionary expenses, now is a good time to set limits.”

Kampitsis’ final piece of advice was a common tidbit: cook at home instead of ordering in or dining out. But you can get even more creative saving money on food as prices rise.

“Shop at farms, orchards and farmers markets,” Peterson said. “In some areas you can do it all year round. In other areas, now is the time.

She talked about the potential savings by buying No. 2, or “ugly,” grade products that don’t meet grocery store cosmetic standards but are otherwise identical.

“Product B or #2 can be reduced by half or more, with the same taste and nutritional value as A,” Peterson said. “Just by not looking so perfect.”

Spend Money to Save Money: Talk to a Pro

If you’re dipping into your savings, it might be best to spend the money with a financial professional with the skills and experience to protect your life against inflation. If it saves you money in the long run, it’s an investment, not an expense.

“Now is a good time to meet with a trusted financial representative to establish, review, or adjust your financial plan,” Adam D. Schwery said with Country Financial in Gladstone, Mo. “This could include saving more, adjusting investments, redefining or redefining goals, and paying down or refinancing debt.”

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was previously one of the youngest nationally distributed columnists for the nation’s largest newspaper syndicate, the Gannett News Service. He worked as a business editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as an editor for TheStreet.com, a financial publication at the heart of New York’s Wall Street investment community. .