Inflation hit a new 40-year high in March, largely driven by increased gasoline and food prices as the conflict in Ukraine threw global commodity markets into turmoil. In March, the Federal Reserve (the Fed) raised interest rates for the first time since 2018, with additional hikes likely on the horizon. While actions are being taken to tame high prices, the conflict, coupled with ongoing supply constraints and labor shortages, will likely keep inflation elevated for a period.
While you’re likely already feeling the pressure of higher prices, it is never too late to put a plan in place and adjust your expenses accordingly. Here are a few tips to help you get started:
Cut Unnecessary Expenses
Step one is to write down your fixed monthly expenses so you can see where your money is going every month. While this can be a daunting exercise, it’s an important one and can show where you could find opportunities to reduce your expenses through small steps, such as eating out less, or saving on gas consumption by coordinating errands with shopping and taking your children to activities. This can help to add up to substantial savings in the long run.
Establish an Emergency Fund
Creating an emergency fund is a great practice under normal circumstances and becomes even more important under periods of inflation. While the dollar amount needed in an emergency fund is unique to every individual, a best practice is to have at least six months’ worth of expenses saved. Your advisor can help you determine the best savings option for your funds so you can access the money quickly should you need it. Also, you can review this blog for guidance on when to access your emergency fund.
Maintain Long-Term Goals
With costs rising in the short-term, it’s easy to lose focus on your long-term investment picture. It is important to maintain your composure and remember that you’re investing for the long-term. If your situation allows, continue contributing to your 401(k), Roth IRA and/or other investment/saving resources to help make sure you stay on track.
Develop a Plan with Your Financial Advisor
If you need guidance understanding your complete financial picture, reach out to a financial advisor at Southwestern Investment Group. Our experienced advisors are happy to answer your financial questions and help you make informed choices for your future. Contact Southwestern Investment Group today to schedule a consultation.
