Inflation keeps rising and doesn’t look like it will be coming down anytime soon.
Consumer prices jumped in September, a 5.4% increase from September — nearly hitting a 30-year high.
That means you’re paying more for energy and housing costs, as well as groceries and other goods. With the holidays approaching, you’ll want to pay extra attention to how you are spending our money.
“Because of the holidays, people might feel even more inclined to spend money, so they should be more aware of the advertisements and push by media to spend,” said Jamila Souffrant, creator of financial education podcast “Journey To Launch.”
Here are four strategies to keep you on track.
1. Take stock
Before you open your wallet, look at your total financial picture. That can help you determine which parts need the most attention and where you have some breathing room.
Add up your assets, including the amount you have in checking, savings, investment and retirement accounts, plus the estimated value of your house or any properties you own.
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Then, add up the value of your liabilities, such as credit card balances, student loans, mortgage and car loans. Where your finances currently stand lies in the answer to this equation: assets – liabilities = net worth.
2. Rework your monthly budget
Try using a budgeting strategy called the “60% Solution.” The first 60% of your gross income (all of the money you have coming in for the month) goes to “committed expenses,” which includes all taxes, housing costs (rent/mortgage, utilities), credit card bills and everything else that you must pay each month.
The next 30% goes to savings: 20% to long-term savings and 10% to short-term savings, like your emergency fund and a looming big purchase.
The remaining 10% is “fun money” for you to spend on whatever you want to spend it on.
3. Rethink your spending
With the holidays fast approaching, it’s a good time to have an honest conversation with family, Souffrant said.
“Do a Secret Santa or agree to not buy gifts for everyone and just pick names out of a hat,” she said.
For any purchases, see if you can buy in bulk so you are not constantly spending as prices continue to climb. If you don’t need that many items, consider forming a mini co-op and split the cost and items among family, friends and neighbors, Souffrant suggests.
If you commute, consider carpooling to cut down on the cost of gas.
To cut back on your overall spending, look back at what brings meaning to your life and write it down. Then analyze your expenses and see if there are items you can eliminate.
One thing to try is cutting at least one recurring expense and saving what you would have spent. You may not need six streaming services now, so you can reduce it to three. Put that “extra” money in a special account for new splurges or new spending priorities.
4. Be aware of your emotions
You may want to treat yourself for enduring the pandemic, but before you splurge, approach your purchase analytically before you even put it in your cart, said financial therapist and coach Carrie Rattle, CEO and founder of New York-based Behavioral Cents.
Ask yourself if you already have one, how often you’ll be using it and whether you have price compared, she suggests.
You may also have a big fear of missing out due to supply-chain shortages, especially when it comes to holiday shopping. That may make you want to shop immediately to ensure you get all the gifts you want this holiday season.
“The scarcity mindset can induce a level of shopping beyond necessary — securing all of those ‘just in case’ items without thinking through a plan,” Rattle said.
Instead, take some time to think through what you want to purchase most and have one or two back-up items in mind if you can’t secure your first choice. Perhaps you may also wind up giving some holiday gifts a bit late for adult friends and family who understand.
“It relieves anxiety and fear, helping you think a bit more rationally to protect your hard-earned money,” Rattle said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.