Global Courant 2023-04-14 18:34:58
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Inflation is gradually falling but remains high, keeping consumer budgets under pressure from rapidly rising prices.
For some, that could mean making tough financial tradeoffs — an exercise that starts with accepting the situation and honestly assessing your needs, said Lazetta Rainey Braxton, a certified financial planner and co-CEO of a virtual planning firm. 2050 Wealth partners.
“The best defense against inflation is being true to knowing your needs and accepting that[prices]have gone up,” said Braxton, a member of CNBC’s Financial Advisor Council.
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Inflation is a measure of how fast the prices consumers pay for goods and services are rising.
When inflation is high — outpacing wage growth — there are two basic financial adjustments for households to make ends meet: increase income or decrease spending, Braxton said.
The consumer price index, a key measure of inflation, rose 5% in the year through March, the U.S. Bureau of Labor Statistics said Wednesday. That’s an improvement on the peak of around 9% in June, but higher than policymakers’ target of around 2%.
Average wages have not kept pace. Hourly wage fell 0.7% in the past year after factoring in inflation — meaning the consumer dollar is stretched a little bit further.
To generate revenue, the key is to “be creative,” Braxton said. For example, homeowners with an extra room might consider renting it out. People can use their professional skills (such as graphic design or copywriting) to start a side gig for extra money, and can use websites such as Work up to find freelance opportunities, Braxton said.
Financial advisors have also advised taking advantage of the hot job market to potentially find a better paying job or ask for a raise. While conditions have cooled somewhat in recent months, especially in some sectors such as technology, it’s still largely a market for job seekers, experts say.
Alternatively, households looking to cut costs must first itemize all expenses and make tradeoffs, Braxton said. Need cable? How often do you use a certain subscription service?
“There’s no denying that we’re in an inflationary time,” Braxton said. “The bottom line is that everyone feels squeezed.”
