A recent survey by CNBC found that 70% of Americans are feeling financially stressed. This is probably no surprise to most, since you likely are feeling the same way. Inflation is at a 40-year high. While it has come down some, it is still three times higher than the Federal Reserve’s targeted rate.
Just in the last week, gasoline prices have risen 10 cents a gallon and are going to increase. OPEC+, which is the group of Middle East oil producers plus other countries such as Russia, announced they will cut back oil production to increase prices. Higher prices will benefit Russia in the war in Ukraine. These increased fuel prices drive up the cost of many items we purchase because most are delivered by truck.
A family of four is spending almost $400 per month more for groceries than last year. Major retailers report that consumers are choosing more private label products and shopping sales to stretch budgets. There is also a trend to buy at stores offering better values. One way you can stretch your own food budget is to write down a shopping list and stick to it. This will help you to remember the necessities and need a second trip to the store. The other major budgeting benefit is you may eliminate impulse purchases of items you want but don’t need.
Dining out is another area experiencing exploding inflation. Meals that cost $7 are now as high as $10. These costs are not going to return to previous levels because not only do the ingredients cost more, but labor costs that were $8 per hour are now $12.
To get control of inflation, the Federal Reserve is using its only tool available, raising interest rates. This makes all borrowing more expensive, including credit cards. Government data shows credit card balances are rising and delinquency rates are increasing. Household debt levels surged by $38 billion in February from a year ago, according to a report by the Federal Reserve. Credit card interest rates are some of the highest in the country. Do not make just the minimum payment each month or you will pay large amounts of interest. Rising interest rates is also increasing volatility in the stock market.
The world economic outlook is likely to stay challenging for some time. The International Monetary Fund is forecasting the global economy is heading for the weakest GDP growth since 1990. This measures the gross domestic production of goods and services around the world. Many older countries are facing aging populations and increased social cost for retirements and health care. This slowdown could reduce employment opportunity and stock market growth. They will probably need to increase taxes to cover these expenses.
It is important to make sure that your family is prepared for future outcomes. Create a realistic written financial plan. Build up emergency funds to handle an unexpected situation. Manage risk in both your personal possessions and investments. Pay down debts and create a realistic retirement plan.
Today, families are more responsible for their own financial health than ever before. Make sure that your family is prepared for the best outcome possible.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.”
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