The Federal Reserve is fighting it. The markets are fearing it. Investors are looking for ways around it. Savers rejoice because they are finally catching up. I’m talking about inflation, of course.
However, for ordinary people, living on a low or fixed income, it is difficult to avoid the negative impact of inflation. Inflation squeezes budgets, whether it’s for groceries, gas, or heating this coming winter. You can only stretch a dollar so far. So family budgets have to bend or break. And that is the silent battle that many families face today.
While it can be scary for many retirees to see their IRA accounts shrink, low-income families and seniors find it impossible to choose between food and medicine, or winter coats and shoes. Switching from beef to beans only makes a small dent in the budget problem. They should seek help at food pantries and thrift stores.
For these low-income working families, inflation is a growing fog that envelops their daily lives. Here are some potential trade-offs that, while not exactly attractive, could free up some cash for everyday expenses.
The burden of high-interest debt is increasing for many cardholders. But before your credit is ruined by late payments, consider switching to a zero-rate card to give yourself a break. You can find them in CreditCards.com/balance-transfer. Some have extended periods of up to 15 months, during which you are supposed to pay off the balance.
The downside to this approach is that when interest payments resume, they are likely to reach rates as high as 29%. And you will be trapped. Worse yet, if you charged even more on your old empty card, you will have dug yourself a deeper and more expensive hole.
If you’re already overwhelmed, contact the National Foundation for Credit Counseling at 800-388-2227. They can work with your creditors to lower your rates and help you set up a low payment plan.
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You may not have noticed yet, but you will at renewal time, that insurance premiums are rising sharply. You can’t go without insurance, but you can likely lower your cost significantly by opting for a higher deductible.
The downside to this strategy is that if you are in a car accident or if your house burns down, you will have to pay a higher cost. It’s dangerous to tempt this fate, because insurers set their prices knowing how likely you are to have a claim. So by raising your deductible, you’re tempting fate. But it’s better than going completely uninsured.
Here’s a tough tradeoff for seniors. Medicare open enrollment season is upon us, as you’ll soon hear regularly on television commercials. Medicare Advantage plans are spending a fortune promoting their all-in-one plans, which cover not just Part B, but most of what a Supplement Plan provides, and Part D drugs, and even some dental coverage.
How can they afford to give you all this wonderful coverage and still pay for all the TV commercials? Simple. They restrict your freedom to choose doctors, specialists, treatments, and hospitals. You are only allowed to use your contracted providers, who are compensated much less than the specialist you would prefer to see for your diabetes, cancer, or heart surgery. Medicare Advantage is much less expensive on a monthly basis. And it works fine, until he gets sick and wants his choice of care. But save on monthly expenses.
Two people can definitely live cheaper than one, if they move in together and split the rent! And that could free up a significant amount of money if your budget is hit by inflation. Cohabitation has its drawbacks, and written agreements are important to make it work better, whether you’re a relative, a friend, or a lover. But if you have a spare room and carefully examine the roommate, it is a way to hide from inflation.
Prices keep going up, especially on necessities. The best way to ease the pressure is to figure out how to earn a little more by providing a service that others need. The only alternative is to cut major expenses, despite the drawbacks. And that is The Wild Truth.
(Terry Savage is a registered investment advisor and the author of four best-selling books, including “The Savage Truth on Money.” Terry answers questions on his blog at TerrySavage.com.)