Cost of living just keeps rising these days, and at a faster rate than ever before. And it’s not just in the United States–the cost of living is going up across the globe. But why now, and what can you do to save your hard earned money.
Cost of living expenses depend in part on the individual. But according to the Economic Policy Institute, the most common cost of living expenses are housing, food, transportation, childcare, and healthcare. Inflation has caused these expenses to skyrocket lately.
The cost of living is so high these days due to inflation in the United States, which is higher than it’s been in forty years (that’s right, FORTY years!) and due to global inflation, which is at its highest since 2008. There are a lot of factors that contribute to inflation, and all take their toll on our wallets. Here are some of the top reasons for increased inflation and cost of living.
Shutdowns during the pandemic caused manufacturing across the globe to halt. This caused a shortage not only in products, but in the raw materials used to make those products, including plastic, steel, timber, and concrete. While manufacturers have been reopened for some time now, they are still scrambling to catch up with demand. This drives up inflation and therefore our cost of living.
Gas is more expensive than ever, which affects our cost of living in a major way. As of late May, the national average was $4.57 a gallon. For the first time ever, drivers in all 50 states paid over $4.00 per gallon. This is because the price of crude oil has surged to over $110 per barrel, a cost that is passed on to consumers.
And this price surge is for a few reasons:
The US ban on Russian oil. While the US doesn’t get a lot of oil from Russia, the global fuel market is very sensitive. Any decision that affects purchasing fuel has many ripple effects.
Ripples from the pandemic. Demand for oil plummeted during the shutdowns, causing oil producers to slow down production. This supply and demand imbalance has caused prices to surge.
Summer blend gas. During the warmer months, gas companies switch to a “summer blend” which is formulated to evaporate less. But this reformulation comes with a higher price tag of an additional $.07 to $.10 per gallon.
Increased fuel prices coupled with a shortage of drivers and loaders has caused an increase in shipping costs as well. And this cost gets–you guessed it–passed on to the consumers. Almost everything that you buy is transported in some way, so this added cost affects your wallet in a big way.
A shortage of workers has caused many companies to increase their wages. And these added wages and sign on bonuses have caused many companies to raise their costs.
Saving money is more important now than ever. But there’s always steps you can take to get more in control of your finances. Here are our top tips for saving money and getting ahead of the rising cost of living.
Make a budget. We probably sound like a broken record, but making a budget is one of the best ways to get a handle on your finances. Compare your monthly income to your monthly expenses to determine how you are faring in this economic climate. Making a list of your expenses can help you see the areas where you can cut costs and the areas where you can’t.
Cancel unused subscriptions. Do you use your Netflix, Hulu, HBO, Disney+, etc? Are there any that you can part with? Try cutting back on some of these expenses first.
Buy generic brands. When you go grocery shopping, skip on the name brands and opt for the generic brands. They are most likely incredibly similar and can save you a lot of money on your grocery bill.
Seek out coupons. Look in the store circulars and online for coupons of your favorite items. A dollar or two here and there can save you a lot in the long run.
Shop on Wednesdays. Most grocery stores release their circulars on Wednesdays, so you can get first dibs on the best deals.
Combine trips to save on gas. With how expensive fuel is, you want to be as efficient as possible with your car. So try to combine your errands when you can to cut down on unnecessary mileage (and tank fill ups).
Carpool. If you have some local work friends, try carpooling to work. You can both save on gas prices (and also get to utilize that sweet carpool lane!)
Refinance your car. Refinancing can save you money in a few ways. First of all, if you may qualify for a lower car loan APR if either your credit score has increased or if prevailing car loan APRs have decreased. Lowering your APR can add up to hundreds if not thousands of dollars in savings. But even if your APR doesn’t change drastically, refinancing can still help you save money if you change your repayment period. Lengthening your repayment period will give you more time to pay off your loan, thus spreading the payments out so they are smaller.You will pay more in interest over time, but it can give you more breathing room every month. You can also shorten your repayment period. This will make your payments larger every month but will allow you to pay off your loan sooner and save you a ton in interest payments.
Switch to remote work, if possible. More and more companies are allowing you to work from home. And with the price of gas, this can be a huge perk (not to mention the time you can save every day!)
Ask for a raise. Employers are aware of the increased cost of living (after all, they are dealing with it as well). So be honest with your employer and ask for a cost of living raise. They may surprise you with their response and give you the extra income you need.
Look for a side hustle. There are tons of ways to earn a little extra money these days. Look into driving for a rideshare or grocery shopping for other people. A few extra hours of work a week can give you a little more breathing room in your monthly budget.
Negotiate your bills. Call your providers (such as your cell provider, TV, and internet) and see if they can reduce your bills. You may be surprised by their willingness to help. You can also try to negotiate fees on your credit card and overdraft fees from your bank.
Eat out less. Eating out at restaurants is more expensive than ever with the rising cost of food. If you are accustomed to eating out or ordering takeout a few times a week, try cutting back a little to stretch your budget a little further.
Pay back your debt. When things are tight, paying down debt may be the last thing on our minds. But prioritizing paying past debts will help you to eliminate their obligations and free up your money faster. At the very least, be sure to be making your minimum payments.
Keep your emergency fund loaded. Again, saving your money during tight times might not be a high priority. But this is when it’s most important to have a solid rainy day fund. If something goes wrong when your budget is stretched, you are less capable than ever of dealing with it. So keeping some extra money socked away is super important. (Experts recommend having three to six months worth of expenses in your emergency fund.)
Invest in bonds. If you are looking for a safe place to invest your money, look into buying “I bonds”. I bonds rise and fall with theConsumer Price Index, so they are protected against inflation. They are virtually risk free and are much safer than most other investment options out there today.
If times are tight, be sure to make a practical budget to help you stay on track. Look for simple ways to cut your expenses, such as switching up your grocery shopping habit and refinancing your car.
A car refinance is a great way to save you money every month. And with how low car loan APRs are right now, it’s the perfect time to make the switch. Get in touch with our experts at Auto Approve today–they love to save people money and can help guide you through the process of refinancing. Get started today with a free quote!