Here are the best ways to protect your savings against rising inflation – The Virginian-Pilot


With inflation at its highest since the early 1980s, many people — especially those living paycheck to paycheck — may struggle to save money.

Inflation is expected to remain elevated, with most economists polled in Bankrate’s second quarter economic indicators survey predicting inflation will either stay as expected or rise even faster. With sky-high consumer prices, inflation continues to outpace wage growth and savings rates, making it difficult for Americans to find room to save.

Still, it’s important to save – or avoid spending the savings you have – especially with the potential for a recession. Until the beast of inflation is brought under control, there are some strategies you can adopt to lessen its impact on your finances, protect your savings, and develop better overall financial health.

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Often it can be easy to spend your income and run out of money to save before you know it. That’s why it’s important to plan ahead and figure out how much you can comfortably save on each paycheck, then put that amount into savings upfront.

“If you put those savings first, you can find a way to live within the limits you set for yourself,” says Sam Lewis, founder and financial planner of SJL Financial in Wilmington, Delaware.

How much you should save depends on a few variables, including your total income, household size, and savings goals. A common budgeting strategy is the 50/30/20 rule — 50% of your income goes to needs, 30% to wants, and 20% to savings.

However, it may not be realistic for many, especially those who live paycheck to paycheck, to store 20% of their income. What is important is to try to cut expenses and come up with a plan to deposit money at the beginning of the month into a savings account, with the aim of not dipping into those savings for daily expenses.

There are various budgeting apps that can help you stay on track with a savings strategy and save time too. Some of these apps even analyze your income and expenses to help you figure out how much you can save each month.

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Once you’ve set aside some portion of your budget to build a decent savings cushion, think about how best to spread out the expenses – looking for where expenses could be cut. Being more aware of your spending can help eliminate impulse purchases.

“Become more intentional about the amounts in your spending categories,” Lewis says. “What is the best use of your limited resources? »

A good strategy is to prioritize paying off credit card debt or other types of consumer debt. If you get rid of your debt sooner, you can save more in the long run by limiting the amount of interest accrued. Plus, in a rising rate environment, what you save on future debt repayments could be more than the rate you’d get from a savings account.

“If you have credit card or other personal debt, you’ll likely get a better return paying off the debt than putting the money into savings,” says Jay Zigmont, PhD, CFP, founder of Childfree Wealth, a company financial planning. based in Water Valley, Mississippi.

For credit card debt, consider transferring your balance to a balance transfer credit card, which may have an interest-free introductory period for a year or more.

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Two areas facing the highest inflation rates are food and energy.

High utility costs like water and electricity can reduce potential savings. You can save energy, especially in the warmer months, with a few simple lifestyle changes. Moreover, it helps reduce the overall consumption of limited resources and contributes to building a greener nation.

The US Department of Energy offers a guide with lots of tips for lowering utility bills. Here are several such pointers:

Save up to 10% on heating and cooling by turning the thermostat down 7 to 10 degrees Fahrenheit for eight hours a day in the fall and winter, or raising it in the spring and summer.

If you have access to your water tank, insulating it can save 7-16% annually in water heating costs.

Put scraped dishes in the dishwasher instead of washing them by hand, and only run the dishwasher when it’s full.

Cover and wrap food in the refrigerator to prevent moisture from escaping, which can reduce the amount of energy needed by the refrigerator’s compressor.

Use small appliances (like microwaves and toaster ovens) for small meals, rather than a large stove or oven, which can reduce cooling costs during the summer by generating less heat.

When doing laundry, using warm water instead of hot water can cut the amount of energy used for charging in half.

Unplug electronics when not in use or use advanced power strips that prevent electronics from drawing power when turned off. Electronic devices that consume energy when turned off can add another 10% to a monthly electricity bill.

Switch to energy efficient LED bulbs; you can save up to $80 in electricity over the life of the bulb.

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When it comes to high costs, it’s probably obvious that grocery store prices have faced some of the biggest price increases. Egg prices rose 33.1% in June from a year ago, with other essentials like butter and milk not far behind.

When buying groceries or household items, compare brands and see if there is a cheaper option. Look for store brand items, which are often significantly cheaper than other brands, and buy from local product sellers.

Also consider replacing some ingredients with other cheaper alternatives. For example, you can use oil instead of butter for cooking.

If you make a habit of shopping around and choosing cheaper alternatives, “you won’t feel the impact immediately, but over time you will see it in your savings,” says Lewis of SJL Financial.

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The reality is that we can’t completely stop ourselves from making purchases that aren’t totally necessary. But it is possible to offset these costs by making a little extra effort to pay them.

“If you’re in conservative mode about spending and saving, but still want something unnecessary, you can do that once you make enough money from a side gig,” says Lewis.

Here are some of the ways you can earn extra money in your free time:

  • Home care or babysitting
  • Walk the dog
  • Complete paid surveys, such as with Survey Junkie
  • Resell your clothes online, like with Depop or Poshmark
  • Teach English to children in different countries with programs like VIPKid (you don’t even have to speak another language)
  • Freelance writing

Look for side hustles or gig work that matches your interests. Then you can generate more income while developing skills in an area you are passionate about.

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If you’re thinking about asking for a raise at work, now is the time to do it.

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“When inflation is high, and especially when the labor market is favorable to workers, there are usually more wage increases,” says Zach Teutsch, financial adviser and founder of Washington-based Values ​​Added Financial. “Now might be a great time to ask for a raise, especially if your team recently lost another worker.”

A raise is a great opportunity to save. You can use the extra money to pay off debts or contribute to an emergency fund.

Additionally, you can take the opportunity to demonstrate to a supervisor or employer all of your accomplishments and contributions at work. It can help you advance in your career and achieve broader career goals.

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Between wildly inflated prices for everyday items like groceries and fears of a recession, it’s easy to feel defeated in today’s economy. But now is a good time to develop financial literacy and look for opportunities that may arise.

Certainly, paying off debt is one of the most important things to prioritize with your finances. You can work on paying off your debts while committing to putting at least some money in an emergency savings fund, which can help you stay better prepared financially in the long run.

You can also cushion the savings with a little extra cash by cutting utility bills, picking up a side gig here and there, and negotiating a raise at work.

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