319- Ruthless Money – How to Fight Inflation
On May 11, the Bureau of Labor Statistics (BLS) announced that inflation was 8.3% for the year ended March 31. This was the second straight month of over 8% price increases. At the same time worker wages have only increased about 5.6% for the matching time period. This shortfall is causing American households to get serious about managing their money—they are becoming ruthless in their actions. You should too. Ruthless needs to be the approach to managing your money.
Cash is more precious a commodity than it has been in years. Do you know where to look for discounts and value purchases? Find ways to increase your income? Are you too busy to research cash saving ideas? We can help you answer these questions and help you discover practical actions to implement.
BLS reports that the average American household currently annually spends over $63,000 on living expenses. At the same time several different research organizations are reporting that households are now spending about $300 to $600 more per month to address the impact of inflation on their budgets. The increased amount differs depending upon where they live and work.
Let’s delve a little deeper into these questions about how to address the impact of inflation:
Do you think your household can reduce some of its spending?
Could your family work together to find ways to save money?
How much do you think you could save of that $63,000?
Could you save at least 1% or 2% or $630 to $1,260?
How significantly has inflation impacted your spending?
Are you looking for new ways to save money?
The answer to each of these questions should be a resounding yes. The next question you might ask is, Where should I start looking for savings and income source ideas? We have written a $3.99 eBook, The FinancialVerse Guide to Savings – 600 Practical Cash Savings Ideas, to help. This guide was created to provide, in one place, a compendium of the cash savings ideas that have been presented to help you address inflation.
All ideas presented have been written considering the pandemic and inflation and what they have done to our lifestyles. We have organized the savings ideas by 25 major topics to make it easier for you to find ways to save cash and to make your world a better place. For example, if you are looking for ways to reduce your transportation costs, simply go to the Transportation section.
How to Start Becoming Ruthless
So where should you start on your journey to ruthlessness? How do you factor in our inflation and pandemic-influenced world? Where do you begin your journey? I believe the best way to plot your actions is to take three simple steps:
Revisit your personal financial values
Set your savings or income goals
Agree on timeframes to meet your goals
Here are some thoughts on these three steps.
Personal finance is different for everyone because it is just that—personal. The root cause of why there is so much variety in how people handle (or don’t handle) their money is because we all have different matters that are important to us. What we value in life influences the kinds of goals we set for ourselves, and our individual goals will determine the actions we take to reach them. If you can understand what drives your decisions, you can better manage your financial affairs and get the improvements you need.
Financial values are a person’s or household’s principles or standards of behavior when it comes to money. They are the judgments about the importance of money. It is a great exercise for you and your partner (if you are in a household) to take 30 minutes and talk about the key matters that you value most in life—what brings you the most joy, what you’re striving to achieve and how you how you want to spend your non-work-related time. Make a list of them and, if possible, identify how money relates to supporting those values and making them happen.
Financial values fundamentally boil down to agreeing on the purpose of money in your life. If you cannot agree on this, you won’t know which savings ideas will work for you. Some examples of values are how much non-work-related free time you want, how large a family, how much travel you want to do, what charitable contributions you want to make, the importance of self-care and where you want to live—in the suburbs or in a large city.
Answers to these value questions will each have a monetary impact on your spending decisions. Investing the time to agree on your money values will also minimize conflicts about how to manage money in these difficult times. I have learned that if you can agree on the major values, the day-to-day minor issues take care of themselves.
Sample Questions to Ask Yourself About Money
Let’s take a look at key money areas and the questions you should ask yourself as you develop or revisit your financial values.
1. Money Knowledge
a. What is the level of your money knowledge?
b. Have you taken a personal finance course?
c. What did your parents teach you about money?
d. How much time do you spend each week learning about money?
a. What kind of lifestyle do you want?
b. Are you financially secure? If not, how badly do you want to be?
c. Do you want to travel and to where?
d. Do you need to keep up with your friends’ lifestyles?
e. How much time do you want to devote to work? Do you live to work or work to live?
a. How do you feel about your current income? Are you making what you deserve?
b. How do you feel about your future earning potential?
c. Do you want or need a side gig?
d. Do you need to upgrade your skills to get a better job?
a. Do you consider yourself a spender?
b. How often are you an impulsive spender?
c. What is your biggest weakness when it comes to spending money?
d. What are your philosophies on spending?
e. Do you plan your big purchases?
a. How much debt do you currently have?
b. Are you current with all of your debt service payments?
c. Do you know and manage your credit scores?
d. If you want to buy something, are you opposed to going into debt to buy it?
e. What is you’re feeling about keeping a balance on your credit cards?
f. Do you want to live a debt-free lifestyle?
g. What are your overall thoughts about debt?
6. Saving Money
a. Which is more important to you, saving money or paying down debt?
b. Do you have an emergency fund? Do you think you need one?
c. Do you consider yourself a natural saver?
d. Do you have an ongoing effort to reduce your living expenses?
e. What are your thoughts about saving money?
7. Managing the Details
a. How much time do you spend each week managing your money?
b. How do you stay on top of your personal finances?
c. Are you financially organized?
d. Did you know that keeping track of finances is the foundation to personal finance success?
e. How do you keep track of your finances? Do you use a budget app?
The answers to these questions and other you will come up with should translate into money actions you should take to reach your goals.
A key part of agreeing on your values and setting goals is to give each goal a timeframe for completion. For example, one goal you would set is to have a fully funded emergency fund within 9 months of your start date. I have learned that being as specific as possible with your values, goals and timeframes, leads to more success. As I think about this process, I always remember the saying—If you don’t know where you are going, you’ll end up someplace else.
Again, if you are looking for a great resource to help you work through this money reset in your life we have produced a $3.99 eBook, The FinancialVerse Guide to Savings – 600 Cash Savings Ideas.
Inflation has created the necessity for all of us to reconsider our approaches to money. Many of the ways we have handled money in the past need to change for the short and long term. You should sit down and objectively revisit your financial values, goals and targets in light of what has happened and what you have learned. Be sure to be honest with yourself and answer your own set of questions. It is always amazing to me that once the facts are known, people will take the right cash savings actions. With some study and analysis you can offset
much of the impact of inflation on your household’s budget.
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