We survived the ups and downs of 2020, and we adapted to a post-pandemic world.
Despite those challenges, another setback reared its ugly head in 2021: inflation.
While rumors of rising inflation began in the fall of 2021, skyrocketing prices made their presence known by the holidays.
Inflation has grown at the fastest pace in nearly forty years. Everything costs more: from groceries and gasoline to airfare and hospital services.
As a result of this trend, inflation is expected to cost Americans an additional $3,500 in expenses in 2022.
While inflation rates will eventually go down, immigrants need strategies to get the most out of their money. Here are five great ways to combat rising prices in the coming months:
1. Adjust Your Budget
According to Investopedia, inflation is “a decrease in the purchasing power of money.”
In other words, inflation lowers the value of a currency, forcing consumers to pay more money for a product that previously cost less.
In New York City, for example, inflation is forcing $1 pizza companies to raise their prices to $1.50. And according to the US Department of Labor, a consumer who paid $100 for a given product last year would pay $106.80 for it today.
Because everything costs more, you might consider reviewing your current expenses and identifying any spending habits you can put on hold.
Maybe that means cancelling an extra streaming service or freezing your gym membership.
Or, maybe it means eating out less frequently.
Whatever the solution may be, start by looking at your expenses. Circle items that may be categorized as a “want” rather than a “need,” then adjust your budget accordingly.
2. Buy in Bulk
Eating out is always expensive, but thanks to inflation, so is dining at home.
Average grocery prices jumped 6.4% in December, with beef costs rising over 20% and even items like lettuce demanding 7% higher prices.
Now is the time to shop carefully, to compare prices, and to take advantage of coupon apps like Ibotta.
To further fight inflation, consumers would also be wise to buy their food in bulk. After all, the basic premise of rising inflation is that even though items are more expensive than they were, they’re still cheaper than they will be tomorrow.
If you eat a lot of canned goods and use a lot of paper towels, for example, you’ll save a ton of money by buying these items in bulk.
Check out warehouse stores like Costco, Sam’s Club, and BJ’s Wholesale Club to stock up on affordable foods and household products.
3. Reduce Energy Consumption (At home and on the road)
In the dead of winter, it’s always tempting to crank the thermostat a few degrees higher.
Unfortunately, inflation has caused utility bills to jump 28% in recent months — the highest climb since 2008.
Electricity, natural gas, and fuel oil are all unusually expensive. Even the cost of firewood has gone up 35%.
According to Mark Wolfe, head of the National Energy Assistance Directors’ Association, “We’re looking at a much more expensive winter this year to heat your home.”
Fortunately, there are some effective ways to cut back on home energy costs, including:
- Lowering your thermostat by 7-10°F for a few hours a day, which can save 10% on annual heating costs.
- Lowering your water heater’s temperature, which can save 22% of energy costs.
- Improving your home’s insulation and air sealing, which can save at least 15% in expenses.
Then, there are the more practical ways to cut costs. By wearing warmer clothes, turning off lights, and unplugging idle electronics, you can save extra dollars lost to inflation.
Note: If you’re concerned about making ends meet this winter, be sure to contact the Low Income Home Energy Assistance Program (LIHEAP), which helps millions of low-income households pay their heating bills and manage their energy costs.
4. Invest in the Stock Market
Because inflation causes cash to lose value, investing becomes an essential alternative.
Why? Because the stock market averages roughly a 10% return each year. And according to recent research, equities (i.e. stocks and shares in a company) outperform inflation 90% of the time.
In other words, by putting your money to work in the market, you will position yourself to earn a profit.
According to Pamela Chen, Chartered Financial Analyst (CFA) at Refresh Investments,
“During inflation, it becomes more important to invest cash. As prices for goods
increase during inflationary periods, cash will lose purchasing power and one dollar will
buy less than before. Invest your cash to earn a return to minimize the inflationary bite,
or possibly earn a return that keeps up with or exceeds the inflation rate.”
Investing is essential to long-term financial health, and it may be particularly useful now, when inflation is so high.
To learn more, be sure to check out our introductory guide to the stock market!
5. Boost Your Income
Another practical way to fight inflation is to increase your cash flow.
That’s why a record number of American companies are planning raises throughout 2022. According to recent studies, the average salary increase will be just shy of 4%.
Increased wages are necessary to battle inflation. The question is, how will you boost your income?
Consider asking for a raise at your current job, and if they balk at the idea, don’t worry. There are a record amount of job openings on the market, to the tune of over 11 million.
You might also consider picking up an extra job or entering the gig economy, where part-time opportunities can provide much-needed cash.
Want to learn more? Click here to check out five great side hustles for expats and immigrants!
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