Inflation is the worst form of taxation. It’s a real tax and it effects everybody – households and businesses – yet it hurts lower income bracket people the most.
Even though wages may be rising, the real wages (adjusted for inflation) are falling! You have to work more to just maintain the same standard of living you had a couple of years ago because your money is losing purchasing power.
At the time of this writing, the annual inflation rate in the U. S. is 7.7%.
For most Americans, 7.7% is a REALLY high number comparing to the low inflation we used to have just a couple of years ago.
Hypothetically, earning 3% in a savings account while inflation is at 7.7% may make you feel 3% “richer”.
Yet in fact, you’re 4.7% poorer!
But instead of focusing on what is NOT in your control, today let’s focus on what is in your control, which is the way you manage your cash flow!
Don’t worry: I’m not going to suggest to cut coupons when you buy groceries or go on a rice-and-beans diet to save some extra cash.
In my recent “How to Manage Your Money Intentionally” article, I explicitly said that being frugal is NOT the same as being intentional with your money!
Besides, being frugal isn’t sustainable for most people….
So…how can you outsmart the inflation, so that you enjoy life AND save money, which you can make work for you by investing it?
I’ve put together 8 actionable steps to help you accomplish that.
Today we’ll cover top 2 of these steps, and the rest will be covered in the next 2 articles.
1. Commit to Paying Down Credit Card Debt.
When the price of just about everything increases, it can be tempting to rely on credit cards to pay for your expenses.
But taking on more consumer debt (which is BAD Debt) can get you in a serious downward money spiral… Because every time the Federal Reserve raises interest rates to fight inflation, credit card debt becomes even more expensive and… difficult to pay down.
So, making more than the minimum monthly payment on your credit cards is critical to paying off debt.
To get rid of debt faster, consider 2 debt repayment strategies – “snowball” and “avalanche” methods, which I talked about in one of the previous episodes of this show), which are two ways to make aggressive payments on one card at a time, which can help you stay motivated or help you save on interest.
If you have good credit, you can also transfer balances to a credit card with a 0% introductory APR period to help you consolidate your debt and save on interest while you make payments.
What’ important here is to choose ANY Debt repayment method and commit to executing on it until you stop being slave to your debt.
2. Track Your Cash Flow and Stop Money Leaks
You’ve got to know your numbers so you won’t feel like your money situation is out of control, when you’re not sure what money is coming in and, especially, where it is going out.
As I talked in my “How to Manage Money Intentionally” episode of this show, you must be clear about your values, priorities and goals.
Then you’ll be able to align your financial decisions with your goals and according to your priorities.
When I was living in Hoboken, NJ and was focused on creating financial Freedom in my life, it was not important to me that I didn’t have fancy clothes, or latest car or phone….
Personal Freedom is my core value and Financial Freedom was my goal. So, it didn’t bother me that I had a very modest lifestyle because I chose to invest in myself – my knowledge, experience, opportunities – so that I could become a successful investor and make my money work for me.
Some of my friends and family members were spending money on extravagant vacations, designer clothes, new cars, and on dining out….
They were aligning their choices with their values, priorities and goals, and I was aligning my choices and actions with mine.
So, my question to you is: do you know your values, priorities and goals?
Do you know what you’re willing to say NO to, so that you could say YES to the most important things in your life?
There’s no need to compare your situation and priorities with others.
There is no objective way to say “spending your money this way is right, but spending it on that is wrong.”
If you spend money on subscriptions, membership or some “stuff” that you don’t use, or forgot about, or don’t care that much about – you have money leaks that must be eliminated.
So, here what is important for you to remember:
You’ve got to cut on some of your discretionary spending so that you could pay for some things that are REALLY important to you.
Intentional spending is one of the most important secrets of financial success.
P.S. CLICK HERE to watch the episode of the More Money with Millen Show on this topic