How to Maintain Your Savings and Manage Debt in Today’s Environment
Submitted by Carson Now Reader on Thu, 04/06/2023 - 1:00pm
A recent survey from COUNTRY Financial revealed 69% of Americans say inflation has negatively impacted their financial situation and about two in five say they have too much debt. Inflation can make it challenging to save money and avoid debt, but you can take steps to protect yourself financially and maintain your savings during times of inflation. Here are some ways:
Revisit your budget
While the survey found that 39% had a manageable debt, it’s wise to revisit your budget in times of inflation and ensure you’re not overspending and are still building savings. The ability to increase savings comes down to how much you can set aside consistently and how long you can do that. The longer you can save, the more impact of compound growth will be on the money you’re saving. Evaluate your household spending and look for low-hanging fruit areas where you can make some adjustments so that more of your cash flow can be directed to savings.
Maintain an emergency fund
In any financial climate, Americans should keep an emergency fund. While an emergency fund won’t help mitigate the effect of inflation, it can help if unexpected expenses should arise. Keeping at least three to six months of living expenses in someplace accessible, such as a checking or savings account, is recommended. Living expenses are your food, mortgage, gas, utilities, phone, and insurance costs.
However, saving money this way typically doesn’t earn much interest. Talking to a financial advisor can help you balance the need for the appropriate amount of savings for your emergency fund while utilizing any excess in higher earning alternatives for long-term goals like retirement.
Start small
It can be daunting to tackle your debt. Still, many financial experts say it makes sense emotionally and psychologically to pay off whatever obligations someone has, starting small. Start by ranking all your debts from lowest to highest. Attack the lowest balances first. This will help you see some results – and help you accomplish one goal while motivating you to move toward your next goal. Remember that the debt with the highest interest rate will likely tap your pocketbook in the long term.
So, make sure to dig in and tackle that bill early. A high interest rate environment benefits savers more than spenders, meaning those who are saving are getting paid more to do it. If you’re unsure how to determine your short-term saving goals, like an emergency fund, and long-term financial goals like retirement or legacy planning, a financial professional can help.
— Sean Marler CFP is a Financial Advisor with COUNTRY Trust Bank. COUNTRY Financial is the marketing name for the COUNTRY Financial family of affiliated companies (collectively, COUNTRY), which includes COUNTRY Trust Bank.
