“Inflation” is a term that we seem to hear constantly these days. Rising prices mean that a dollar holds less purchasing power than it did previously. This can place a massive strain on households, especially on people of color, who must deal with lower wages than their white peers. Amidst this challenging time, BAUCE has gleaned insights from experts to help you protect your wealth and maintain financial health with these five simple steps:
1. Cut the Fluff
It’s always nice to treat yourself every once in a while; however, when the cost of everyday life becomes more expensive, pulling back from excess spending is key. Bola Sokunbi, the CEO of Clever Girl Finance, shares, “To maintain your budget in these times it’s really important that you focus on your core essentials first. This would include housing, transportation, food, utilities and medicine (which are your must haves) before you build in any nice to haves or wants.”
2. Build Those Savings
A common rule of thumb suggests that it is ideal to have at least three to six months of living expenses saved up. It could be worth aiming for a bit more depending on your career trajectory, job stability, financial obligations, and other variables. When money is tight, it can be difficult to find a little extra in your budget to place in a savings fund. But it is worth the extra effort. Clay, who runs the account Black Girl Freedom, advises, “When your money isn’t stretching as far as it used to, it’s important to be very intentional about how best to use the resources you do have. I’d say three ways to get the most out of your savings are to 1) Prioritize saving whatever you can. Even $5 per month can help you get started and build the habit of saving 2) Find ways to keep your costs low whether it’s meal planning, canceling subscriptions or buying store-brand groceries. You can use these cost savings to contribute to a savings account and 3) Take advantage of the higher interest rates on high-yield savings accounts. It won’t beat inflation or give you amazing returns, but it’ll ensure you get the most out of your savings.”
3. Generate Passive Income
In addition to putting your money in a savings account, you can begin to invest a portion of it as well. BAUCE has shared articles on investing in cryptocurrencies, real estate, and ESG-friendly equities. You can make your money work for you if you position it in a way that can generate returns. Keep in mind – your investments can skyrocket up or plummet down based on your portfolio’s composition and diversification. But, as a long-term investor, you can benefit from staying invested in the long run.
4. Be Careful with your Credit Cards
According to the Federal Reserve Bank of New York, Americans added on an additional $46 billion of credit card debt in the second quarter of 2022. This represents a 13% year-over-year increase. On the topic of credit cards, Ayesha Seldon, a Certified Financial Planner, cautions, “A huge misconception is that it’s ok to make minimum payments on credit card debt. As most of you have probably heard, the Fed has increased rates this year for the first time since 2018. The Fed funds rate ultimately impacts consumer debt interest rates. Credit card interest rates have increased this year and probably will continue to increase in the coming months. If you’re not substantially reducing the principal on your credit card debt, you could see your credit card payments increase substantially due to interest alone.”
5. Embrace Automation
This piece of sage wisdom comes from Danielle Davis, who founded Money in Matrimony. Ms Davis encourages folks to leverage technology to help them remain disciplined in their money journey. Ms Davis explains, “To ensure that there are enough savings, I’d suggest setting up a weekly or bi-weekly automation so that funds are transferred to your savings account as often as possible. If someone currently has no savings, I’d recommend selling anything you no longer use that might be of value to someone else. Then use that money to build your savings.”
Times are tough, but you’ve got this, BAUCEs. Use the tips above to help you navigate this period of potential financial uncertainty.