Financial advisors urge budget planning amid inflation

Around one in every five stores may be overcharging for goods, 3 On Your Side finds.
Around one in every five stores may be overcharging for goods, 3 On Your Side finds.(Arizona's Family)
Published: May. 23, 2022 at 8:54 AM CDT
Email This Link
Share on Pinterest
Share on LinkedIn

WAUSAU, Wis. (WSAW) - People are feeling the pinch of inflation everywhere, from groceries to the gas pump. But, financial advisors say not to panic and instead, use the time to reevaluate budgets and spending habits.

The Labor Department announced last month that its consumer price index jumped 8.5% in March from 12 months earlier, the sharpest year-over-year increase since 1981. Prices have been driven up by bottlenecked supply chains, robust consumer demand and disruptions to global food and energy markets worsened by Russia’s war against Ukraine.

“The Fed is increasing interest rates, to help slow down some of that inflation and spending. And the consumer goods sector starting supply is already starting to catch up with that demand. So the thought is over the next six to 12 months that we should start to come down a little bit. How much and how quickly, that’s impossible for anyone to know for sure,” financial advisor at Edward Jones, Christopher Smith said.

While consumers can’t control an increase in prices, there are some things they can do to help ease the pressure on their wallets.

At the top of the list: “The biggest thing is don’t panic, right? Again, we’ve seen peaks of inflation in the past,” Smith said.

He said the second thing to think about is control. If people haven’t already, he said now is a good time to start looking at their budget.

“That’s a good exercise to do at least once a year anyways, just take your last three months of spending and compare it to what you’re making. If there’s something that’s not critical, then in the next six to 12 months, trim it out. Then you can use the excess cash if prices continue to go up. You can make sure that you have something for those necessary costs.”

Smith said the best thing to do in these kinds of situations is be a ‘proactive planner.’

“Have those good foundational things in place like emergency funds, some savings, liquid savings. Regardless of demographic or generation, folks that are more prepared through those ground zero things have been able to ride it out easier.”

But, how do you plan for the increase consumers are seeing now? Advisor and owner of Point Wealth in Wausau, Jeremy Reif, said people have to take a step back and adapt.

“Normally, the government has done a good job of keeping inflation under control, you know, but as the government during COVID handed out, basically free money, well, nothing’s really free. But, this is kind of the repercussion of that. And so that’s what you’re seeing happening right now, is maybe people panicking a little bit, just because they probably spent it rather than saving it. So I guess it’s just a matter of kind of rethinking their budgets and figuring out from this point moving forward, how are they going to adjust? I mean, humans, that’s what we tend to do is we tend to adapt. So people are just going to have to learn to adapt, and this will become the new norm.”

Reif said people can start saving for the future now, by going back to the basics.

“The two biggest assets that people have is like a vehicle and their house. And it’s usually because they have to systematically save into one of those things or make payments into something. So if they can just set aside money, whether it’s $50, $100 or $1,000 a month, into an account, you know, they’re gonna be better set up for the rest of their lives just by doing something simple, where they’re systematically saving it.”

Both advisors said to first get a handle on your budget, make the cuts that fit for you, and find a way to systematically save.

“Usually, at first it’s difficult to do, but once you do it a couple of different times, you know, a couple of months in a row or a year in a row, you know, you just learn to live without it,” Reif said.

The Associated Press contributed to this report.

Copyright 2022 WSAW. All rights reserved.