Katia Chesnok is a Latina money expert and coach and the founder and content creator of Economikat, a personal finance educational platform. She educates Latinx on all things money and empowers them to earn more, save more, side hustle and start investing to build wealth.
We’ve all seen the prices hikes, from groceries to gas it feels like life in general is just more expensive but our personal finances haven’t experienced a similar bump. As we know, inflation will silently kill our household monthly budget but we can’t avoid buying necessities. These days inflation rate is at 9.1 percent, a rampant level we have not seen in 40 years. Stepping out of the house feels expensive already but the reality is we can’t stop buying what we need so here are some actions you can take that will help you and your family navigate rising costs.
- Create a savings fund for your household emergencies, this is the so-called emergency fund. This is the most important way of protecting yourself and your family during pre-recession times. Start saving any amount of money you can, the important thing is to save consistently. A practice that has helped me save my emergency funds every time is to allocate the funds in a particular bank account, preferably in a high yield savings account and to schedule automatic transfers from my checking account to my savings account. The rule of thumb is to save from 3 to 6 months minimum of our monthly expenses.
- Pay off credit card debt or your highest interest debt as soon as you can. According to reports by the Federal Reserve, credit card debt rose to around $840 billion—$71 billion higher than the end of the first quarter of 2021. As the inflation rate increases, the credit cards interest rates might also increase thus making borrowing money now much more expensive than before. Also, credit card companies might increase your minimum payment for the credit card and your overall debt might take longer to be paid off.
- Start a side hustle or side business. Now is the time to create at least one additional income stream besides our full time job. Starting a side job will bring you more income but will also serve as a protection in case your full time job is affected by the upcoming recession. Focus on your current expertise, passion or skills and find something you enjoy doing that could generate additional income.
- Negotiate your current salary at your job, as prices increase all around, so should your work. Start by researching the current salary range for your position using websites like Payscale or Glassdoor. Then, make a list of all your highlights or achievements during the last 3 or 6 months in this position. Plan ahead and meet with your boss and ask for what you’re worth. Also, keep in mind that this is the time to network as much as possible as well. Network with people in your industry and apply to higher paying jobs when possible. At the end of the day, job hopping is one of the most effective ways of increasing our income. If you’ve been at your current job for a year, it’s time for a raise so come prepared with all that you’ve brought to the table.
- Keep investing or start investing passively for the long term. The reality is that the stock market is much more volatile than usual during high inflation, but there are ways to diversify your investments and lower your risk including investing in index funds or etfs (baskets of different stocks, bonds), TIPS (treasury inflation- protected securities), and I bonds (Investors can now buy I bonds at a 9.62 percent rate through October 2022). However, if it your first time investing or if you feel you need help it’s better to find a professional such as a financial advisor. Before finding a financial advisor, you should ask: is the advisor fiduciary? What will be your costs? What services will he/she provide you? How will he/she allocate your assets? Just to name a few questions. We can’t control how much or when inflation will increase or decrease, but what we can do is try to control our household budget during these inflationary pre-recession times.