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Inflation is gradually falling but remains high, meaning consumers’ budgets continue to be stressed by fast-rising prices.
For some, that might mean making tough financial tradeoffs — an exercise that starts by coming to terms with the situation and making an honest assessment of your needs, said Lazetta Rainey Braxton, a certified financial planner and co-CEO of virtual planning firm 2050 Wealth Partners.
“The best defense against inflation is being true to knowing your necessities and accepting the fact that [prices have] increased,” said Braxton, a member of CNBC’s Financial Advisor Council.
Inflation is a measure of how quickly the prices consumers pay for goods and services are rising.
When inflation is high — and outpacing wage growth — there are two basic financial adjustments for households to make ends meet: increase income or decrease expenses, Braxton said.
The consumer price index, a key gauge of inflation, rose 5% in the year through March, the U.S. Bureau of Labor Statistics said Wednesday. That’s an improvement from the peak around 9% in June, but elevated from policymakers’ target around 2%.
Average wages haven’t kept pace. Hourly earnings fell 0.7% in the past year after accounting for inflation — meaning consumers’ dollar is getting stretched a bit further.
To raise income, the key is to “be creative,” Braxton said. Homeowners with an extra room might consider renting it out, for example. People can leverage their professional skills (like graphic design or copywriting) to start a side gig for extra money, and can use websites like Upwork to help find freelance opportunities, Braxton said.
Financial advisors have also counseled leveraging the hot job market to potentially find a better-paying gig or ask for a raise. While conditions have somewhat cooled in recent months — especially in some industries like tech — it’s still largely a job seeker’s market, experts said.
Alternatively, households who’d like to cut costs should first itemize all expenses and consider tradeoffs, Braxton said. Do you need cable? How often do you use a certain subscription service?
“There’s no denying we’re in an inflationary time,” Braxton said. “The bottom line is, everybody is feeling squeezed.”
