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Rising inflation is forcing Americans to reconsider how they spend their money.
The consumer price index, which measures a wide basket of goods and services, jumped 7.9% in February from 12 months earlier. Prices are rising for everything from the food you put on the table to the gas that powers your car.
According to a CNBC + Acorns Invest in You poll conducted by Momentive, this puts a lot of strain on people’s minds: 48% are constantly thinking about rising prices. An online survey was conducted March 23-24 among a national sample of 3,953 adults.
Three-quarters are concerned that higher prices will force them to reconsider their financial choices in the coming months, the poll showed.
According to Moody’s Analytics analysis, inflation costs the average U.S. family an additional $ 296 a month. Experts expect it to get worse before it gets better.
However, there was no significant impact on consumer spending, although retail sales grew at a slower pace than expected in February.
According to the poll, the biggest area people have cut is lunch, 53% said they did. They also travel less and, among other things, cancel monthly subscriptions.
If higher prices persist, Americans plan to further cut back on lunches, driving, traveling or vacationing.
Of course, last year was difficult for many. As many as 52% said they are experiencing more financial stress than a year ago. They are most worried about gas prices, housing and food costs. Last year, gas rose 38%, housing rose 4.7% and food prices rose 7.9%.
Meanwhile, the majority of Americans are dissatisfied with the White House response, 61% disapprove of how President Joe Biden is coping with inflation.
Fears of recession
In the current environment, most Americans are concerned about the economic recession, and 81% of respondents believe it will happen this year.
“People are definitely on the edge,” said Moody’s Analytics chief economist Mark Zandi. “The risks of recession are high.”
It puts a factor of 1 to 3 and grows.
When will inflation slow down?
Inflation was caused by a pandemic that shook supply chains and labor markets, and was exacerbated by Russia’s invasion of Ukraine, which affected gas and food prices, Zandi explained.
“If this diagnosis is correct, if the pandemic subsides, and if we get the other side of the effects of the Russian invasion, inflation should ease,” he said.
However, consumers will soon experience more pain as inflation continues, Zandi said.
“We have several difficult months ahead,” he said.
He predicts that inflation will peak around May, and so far next year it will be much lower, depending on how global events unfold, as well as the reaction of the Federal Reserve. The central bank raised interest rates last month to fight inflation and plans six more raises this year.
If the Fed doesn’t calibrate things properly, the economy could go into recession, Zandi warned.
Navigation at high prices
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The first thing you need to do is sort out your financial situation.
By asking yourself a few key questions, you can figure out where you can cut costs, said certified financial planner Ashton Lawrence, a partner at Goldfinch Wealth Management in Greenville, South Carolina.
“What does cash flow look like? What type of debt, what debt are we looking at?” he said.
“It’s about making small changes and controlling where you can control.”
More from Invest in You:
Most Americans are concerned about the recession that has come this year
Here’s what consumers plan to cut as prices continue to rise
Here’s how retirees can navigate high prices
Once you see where you’re spending your money, break it down into needs and wants and start cutting things that aren’t mandatory, said CFP Carolyn McClanahan, founder and director of financial planning for Life Planning Partners in Jacksonville, Florida.
In fact, eating all the time not only costs more money than cooking at home, but is also not as good for health, said McClanahan, who is also a doctor. If you are in a grocery store, use coupons and comparative purchases to save money.
There will be nights when there is not enough time and you will be tempted to order takeaway food for dinner. McClanhan cooks on Sundays and puts food in the freezer for those nights.
Pulling or scheduling car trips to minimize driving can help with gas, as can working from home a few days a week if possible.
While concerns about rising prices are natural, you can’t control them – and worrying about it isn’t good for your health, McClanahan said.
“Just think about what you can control,” she said.
“Making sure you spend your money thoughtfully is the only thing you can do to soften the world around you.”
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