Here are some tips to help stretch your paycheck amid high inflation

Here are some tips to help stretch your paycheck amid high inflation

Soaring prices are making it hard for many Americans to afford expenses each month. Costs are rising for nearly every major expense from housing and food to medical care. Employee wages aren’t keeping up. Having the money that’s coming in each month going out just as fast is becoming increasingly common.

Due to high inflation, the typical American household spent $445 more in September to buy the same goods and services as they did a year ago, according to an estimate from Moody’s Analytics.

A little less than two-thirds, 63%, of consumers were living paycheck to paycheck in September, up from 57% a year ago, according to a new survey from LendingClub and PYMNTS.com. In the last year, wages have increased by 4.9%, as inflation jumped by over 8.2%, according to the same report.

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Many people are having to face tough choices to keep from busting their budgets. Yet, “the more consumers shop judiciously, the more difficult it will be for businesses to raise their prices aggressively,” said Mark Zandi, chief economist at Moody’s Analytics.

Here are some strategies that could help stretch your paycheck.

Be strategic when spending

To navigate higher inflation, you need to be a savvy consumer. Start by tracking your spending and try to spend less or less often.

  • Delay purchases a day or two. Take time to look for the best deals and promotions, and gather coupons before you buy. Also, waiting a couple of days may cause you to realize that item you wanted wasn’t an essential purchase.

A person shops in a supermarket as inflation affected consumer prices in New York City, June 10, 2022.

andrew kelly | Reuters

  • Cancel a monthly subscription. After you set up a monthly subscription — for cable TV or streaming services, publications, gym memberships, or weight loss programs — you probably don’t think about it, but that money keeps coming out of your bank account or gets charged to your credit card. Make it stop! Take a close look at all of your subscriptions, then cut out what you don’t really need.

Lower your housing expenses

Housing is likely your biggest monthly expense, and you might be shelling out more than is ideal. Many financial experts recommend spending no more than 30% on rent, while lenders like to see you spend 28% or less of your gross monthly income on housing expenses in order to get a mortgage.

After almost two years of record-low mortgage rates, the lending landscape has changed dramatically. The average rate on a 30-year fixed-rate mortgage jumped from an average 4.14% in March to 6.92% in October, according to Bankrate. So refinancing may not be a viable option now.

  • Reduce electricity use. Shop around to see if there are utility providers that offer lower rates. Also little changes can add up to big savings. Use energy-efficient light bulbs. Don’t run the dishwasher without a full load. Don’t leave the computer running. Turn down the thermostat and/or install a programmable thermostat.

For homeowners:

  • Rent out a room in your house. Check state laws and with the local housing authority to understand any restrictions and obligations. Homeowners associations can also have rules limiting rentals, so understand those policies, too. Contact your homeowners insurance to make sure you can rent and what is covered.
  • Try to get rid of private mortgage insurance. If you put less than 20% when you bought your house, PMI is required. Once you have 20% equity, it can be removed. If home values ​​have risen in your area, you may have enough equity to reach that 20% threshold. If so, ask your lender to cancel your PMI. They must comply if you are in good standing and haven’t missed any mortgage payments.

For renters:

  • Consider getting a roommate.
  • Negotiate for a lower rent. If you don’t ask, you won’t get it. Talk to your landlord. Be honest about your financial situation and suggest a monthly payment you can afford. Offer to do repairs yourself for a break in the rent. Extend your lease at the current rate now, if rents in your area are expected to continue to rise.

The more consumers shop judiciously, the more difficult it will be for businesses to raise their prices aggressively.

Mark Zandi

chief economist at Moody’s Analytics

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