It’s normal for prices to increase gradually over time. But lately, much of America has felt unable to keep up with the dramatic rise in the cost of everything from housing to food and transportation to healthcare.
According to a survey done by TD Ameritrade, nearly half of the people polled believe the number one threat to their financial future is the rapidly increasing cost of living.
So, how can you deal when your cost of living goes up? Here are the best ways to make sure you don’t fall behind, whatever your situation.
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1. Create a new budget
Your budget is the foundation upon which you can build the rest of your financial life. When the cost of living goes up and your financial situation changes significantly, making a budget can make life easier.
If you don’t already have a budget, there are as many budgeting methods as there are types of people, so choose one that fits well with your situation. You can also use a budgeting app to automate the whole process.
If you already have a budget, you can go in and adjust the numbers to reflect your current cost of living. Make sure your income is updated as well so you know exactly how much is coming in and going out.
To really cut costs, go through the last few months of your bank statements manually, adding up your monthly expenses and putting them in categories. This process will make you acutely aware of where your money is going, which is key to the next couple of steps.
2. Cut back on discretionary spending
As you go through your monthly expenses, you may come across a few surprises here and there. Maybe you spent more on food delivery than you thought. Or maybe you’ll wince when you think about all the money you spent on gas when you see how many trips to Target you’ve been making.
Start cutting out some of your unnecessary expenses. For example, you could cut takeout and dining out for a month. Planning ahead before you go shopping will help you keep your total under control — grocery delivery apps like Instacart are great for this because they offer a pickup option free of cost. Avoiding in-store shopping prevents you from grabbing up items you don’t need.
If you’ve already hit a bare bones budget and can’t cut out any more expenses, the next steps might help.
3. Cancel subscriptions and negotiate bills
Subscriptions often sneak into your budget and hide there, eating away at your money without you even realizing it. Try to identify all your recurring payments, whether monthly, quarterly, or annually — services like TrueBill can help you do this. If you’re paying for more cable channels than you watch, think about changing your subscription to a new plan. Or if it’s not something you use regularly, it may be time to cancel.
Even if you don’t have any subscriptions, you might be paying unnecessary fees for things like your bank account or credit card — consider switching to a free checking account or a no annual fee credit card. You can also negotiate recurring bills like insurance payments or downgrade services like your cell phone plan. If you have credit card debt, consider negotiating a lower APR or looking into debt consolidation to lower your monthly payments.
4. Use your talents to increase your income
If you’re not able to negotiate the raise you deserve at your job, it might be time to consider a side gig. Look into using a skill or interest you have to make extra money on the side. Or consider developing a new skill that could help increase your funds.
If you like driving, download some audiobooks and fill any gaps in your schedule as a delivery or rideshare driver. Are you a pet person? Websites like Rover will match you up with pet-sitting gigs in your area. For a long-term solution, look into positions in your industry or at your place of work that meet your compensation goals, and then figure out how to acquire the skills and experience you need to get those jobs.
Don’t count out government assistance, especially if you’re low-income or have had your pay or hours reduced. It’s worth seeing if you’re eligible for SNAP benefits. You can also apply for unemployment in your state.
5. Consider relocating
If you’ve taken steps to manage your spending and increase your income and your budget is still tight, it might be time to consider a move. While moving is never easy, and sometimes may not be an option, there are plenty of places that offer a low cost of living paired with relatively high average incomes for folks who are location-flexible. These even include major cities like Austin, TX and Minneapolis, MN.
Whatever you need to do, taking steps to create space in your budget is always worth it. Whether you’d like to save money for an emergency fund, go on a nice vacation, or spend more time with family, removing the stress of trying to make ends meet lets you focus on more fulfilling goals.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/5-ways-to-cope-when-your-cost-of-living-goes-up/