Inflation has been one of the most pressing money issues plaguing the globe this year. In the U.S., inflation was 7.7% for the 12 months ended October 2022. It’s put a major strain on household finances, and Americans are wondering if relief is in sight.
“Generally speaking, the health of the U.S. economy is strong, but is undergoing a transition from pandemic conditions to post-pandemic conditions,” said Keith Sultemeier, president and CEO at Kinecta Federal Credit Union. That transition probably won’t happen quickly, however, and while inflation will eventually slow, we can likely expect higher-than-usual levels well into 2023.
So what can you do to prepare your finances for more inflation next year? Consider these tips.
Get Serious About Budgeting
With inflation hitting the cost of everyday essentials the hardest, it’s important to review your household spending habits. “This can greatly help you in getting a complete picture of your financial habits and where adjustments may be made in order to maintain sufficient savings,” Sultemeier said.
For example, if you regularly exceed your food budget, you may want to look into bulk buying and meal planning to cut costs. If it’s gas for your car that’s straining your finances, investigate public transportation options. Remember, these changes can be temporary until inflation reaches ideal levels.
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Avoid Emotional Money Decisions
The Federal Reserve has been in charge of keeping inflation in check. So as inflation has continued to hit record numbers, it has instituted a number of hikes to its target interest rate. Aside from making it much more expensive to borrow money, these rate hikes tend to cause the market to jump.
Stock market volatility can make investors nervous, and it may be tempting to sell securities that aren’t performing well. But that only ensures that you miss out on gains as the market recovers over time.
“Don’t make emotional decisions with finances based on the fear of market volatility,” Sultemeier said. He recommended reviewing your investments and financial goals with a financial advisor or other professional who can help ensure you stack on track.
Earn Rewards on Spending
You may not be able to control the amount you have to pay for goods and services, but it is possible to spend smarter by earning rewards and benefits for purchases you have to make anyway.
“There are a wide variety of credit card rewards available for consumers to choose from today, including airline miles, cash back, extended warranties, travel/car rental insurance and a slew of new cardmember bonuses,” Sultemeier said. And if you’d rather not open any credit cards, sites such as Rakuten and Capital One Shopping offer cash back on online shopping.
“These perks enable cardholders to get the most out of each dollar they spend,” Sultemeier added.
Work on Your Credit Score
As inflation continues, you might find that you need to borrow money to make ends meet or cover a major expense. Whether it’s a credit card or personal loan, it’s important to make sure any debt you do take on is as low-cost as possible. That means applying with good credit.
“Many Americans find themselves in the position of needing to build or boost their credit score when it comes time to apply for a loan or card,” Sultemeier said. So if your credit isn’t in great shape, consider spending the next several months working to build it up. That way, you’ll be prepared if you need to borrow money in the future.
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This article originally appeared on GOBankingRates.com: Inflation 2023: How To Prepare Before It’s Too Late