Opinion: Rising inflation is here, but San Diegans have plenty of ways to cope
By any measure, current inflation rates in the United States have seen the fastest annual increase in more than 30 years, and concern grows every day as the cost of goods and services rises.
The current growth rate of 7.5% of the Consumer price index has taken an estimated average of $200 a month out of consumers’ pockets, and some of the factors driving the price increases may linger for some time.
Given these constraints, how can consumers mitigate their impact? More careful budget planning and thoughtful spending are the best starting points.
Here are some trends and tips to help you understand what to expect and how to deal with them.
Inflation may not subside anytime soon, so it’s important to re-examine your monthly budget with a longer-term view. Focus on savings first and carefully look for opportunities to reduce expenses.
To buy food
- Shop at stores that generally offer lower prices
- Buy in bulk and stock sale items when available
- Choose generic or store brands
- Look for coupons, most of which are online or automated now
- Consider alternatives to pre-packaged meals
- Look for cheaper alternatives to meat or choose lower quality cuts and marinate them
- Replace restaurant meals with gatherings at home or at a local park
- If you work away from home, start preparing your meals, snacks and drinks
Save on gas
- Consolidate your journeys
- Set up carpools
- Work remotely when possible
Save on housing
- With few offers to be found at the moment for the purchase of a house, stay patient
- Shop hard for apartments and evaluate several options
- Wait for major home improvement projects
- Reduce electricity, gas and water consumption – adjust the thermostat, withstand the weather and seek out tips, rebates and additional resources from utility companies
- Wait to buy a new or used car until more inventory becomes available in mid-2022 or 2023
- Clothing and electronics aren’t as affected by inflation, so deals can still be found
- Shop on many websites when shopping. Don’t automatically choose Amazon by default, but check Walmart, Target, and local discount stores for the best prices.
- Use a shopping survey mobile app
- Review and reduce automatic subscriptions, such as for streaming services and other products
- Use rewards programs, such as cash back credit cards
Most importantly, stay calm, tightly control your budget and spending, and rest assured that this inflationary period will also pass.
And what about interest rates?
Finally, some thoughts on managing the impact of rising interest rates. Although mortgage rates are already climbing, they are still relatively low and should not deter you from buying a home if you find a reasonable offer and can afford it. You can also look to refinance your home if your current rate is above 4%.
Auto loan rates will tend to rise, but more slowly, and should be less of a factor in your decision right now than car prices. Credit card rates are higher and those indexed to market rates will increase further. It is therefore worth repaying or refinancing this debt and looking for savings alternatives. As always, look for ways to improve your credit score.
If you save money, savings rates will likely be stable with little initial movement. But you can protect your purchasing power and investment returns by investing in inflation-protected securities like inflation-indexed bonds or Inflation-protected Treasury securities. Ask for help with investing from a trusted financial advisor.
Doug Wright is Chief Financial Officer of Mission Federal Credit Unionn, the largest nonprofit, member-owned financial institution exclusively serving San Diego County.