Americans are particularly focused on their finances thanks to surging inflation.
Coronavirus has created chaos worldwide. Read on for tips to help you handle this health and financial crisis. |
Times are tough! We're here to help. Welcome back to Invest in You: Ready. Set. Grow's supplemental Money 101 guide to financial wellness as we navigate the pandemic. Financial Literacy Month is underway and this year, Americans are particularly focused on their finances thanks to surging inflation. Some 48% of U.S. adults think about rising prices all the time, according to a CNBC + Acorns Invest in You survey, conducted by Momentive. Three-quarters are worried that higher prices will force them to rethink their financial choices in the coming months, the survey found. To be sure, there are no signs that inflation, which was up 7.9% in February from 12 months prior, is expected to slow down in the near term. Americans are also stressed, with 52% saying they were under more financial stress than a year ago. In addition, they are worried about an economic recession: 81% think one is likely to happen this year. Today, we'll look at where people plan to cut back if prices continue to increase, when experts think inflation may level off and how to adjust your budget. We'll also address those fears about an upcoming recession.
Thank you for already undertaking your journey to financial wellness. We hope these supplementary lessons help pave the way forward. Sharon Epperson
CNBC Senior Personal Finance Correspondent
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AMERICANS CONCERNED ABOUT RISING INFLATION |
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Where Americans plan to cut back |
With inflation costing the average U.S. household an additional $296 per month, some Americans are already changing how they spend their money. More than 50% of adults said they've reduced the number of times they are dining out and will consider more cuts if higher prices persist, according to the survey. Forty-two percent say they will cut back on driving, 40% will cancel a trip or vacation, and 36% will cancel a monthly subscription if inflation continues to surge. To a lesser degree, they may also switch to a generic product or delay buying a car or home. |
Get a handle on your financial situation by looking at your cash flow and expenses. Once you see where you are spending money, you can break it down into needs versus wants, said certified financial planner Carolyn McClanahan, founder and director of financial planning at Life Planning Partners in Jacksonville, Florida. Then, start cutting back on spending that isn't necessary, such as eating out and monthly subscriptions. Coupons and comparison shopping can help you save money at the grocery store. For those struggling, reach out to creditors and lenders to see if you can delay payments, suggests Tania Brown, an Atlanta-based certified financial planner and founder of FinanciallyConfidentMom.com. Some may also qualify for programs to help with utility bills. |
"One of the great defenses to being worried about inflation is not having a lot of silly needs in your life." — Charlie Munger |
Inflation, which was brought on by the Covid-19 pandemic fallout and worsened by the Russian invasion of Ukraine, will continue to rise over the next couple of months, said Moody's Analytics' chief economist Mark Zandi. He predicts inflation will peak around May. By this time next year, it should be a lot lower, depending on how global events play out, as well as the response by the Federal Reserve, he said. The central bank increased interest rates last month to combat inflation and plans another six hikes this year. |
While a majority of Americans think a recession is likely this year, many economists aren't too concerned. "If you look at the labor market data right now, you'd be hard pressed to find any indication of recession," said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. "Maybe a relative slowdown, but that's from really hot to just hot." However, if the Fed doesn't calibrate interest rate hikes just right, the economy could go into a recession, Zandi warned. There have also been warning signals from the bond market about the possibility of a recession. Zandi currently puts the odds of a recession at 1 in 3 and rising. |
High inflation is expected to stick around for a while. However, while it is natural to be concerned about rising prices, you can't control them. "Only think about the things that you can control," McClanahan advised. "Making certain you are spending your money in a thoughtful fashion is the one thing you can do to help mitigate the outside world around you." |
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