Should I be worried about inflation?

Should you be worried? No. Should you be prepared? Yes.

In our post-COVID environment, we have seen a big surge in our economy which has led to higher inflation than we’ve seen in quite a while. Now is not the time to panic. Inflation happens all the time – prices go up. However, what we’re seeing now is a slightly faster increase in those price increases and that is leading to a lot of scary headlines. The fact is, there are a lot of smart money moves you can be making now to manage inflation risks successfully.

Develop a detailed budget.

This monthly spending plan is your key to financial success regardless of whether we are in a period of inflation or not. This commitment to monitoring your finances regularly is particularly important in our automated, digital-payment era. We have automated many of our payments. We regularly tap our phone or our debit card when shopping or eating out. We exchange money with our friends and family via an app. As we move away from cash-based transactions, we (literally) lose touch with our money. Money becomes a somewhat abstract concept when instead of flowing through our hands and wallets, it flows through digital apps. Routinely reviewing your spending and savings habits via a budget will help you to see those areas where inflation may be really affecting you, or areas where you can save a little more. For tips on Building a Better Budget, Click here.

Move your money.

Work with a trusted banker to help you determine the best way to make the most of your money during a time when your dollar is worth less than it was a few months ago. Online “inflation-busting” gimmicks are rarely going to help you. Visiting with a local banker who understands your local economy, is always your best option. Some things to ask your banker:

Should I keep less money parked in a checking account and move some of it to a higher-yielding money market account?
Should I reduce my Emergency Fund and keep it fairly small since interest rates on savings are so low?
Is paying off debt quickly, with money that is worth less now than when I borrowed it, a smarter money move than building up savings?

Search for new, less-expensive entertainment options.

This is a Budget 101 idea, but during a period of inflation it can become a real necessity. It is important to have a balance in your life, but when inflation fears enter in, it can cause us to pull back too much. You should still have some pleasure, relaxation, and fun. Look for free festivals, concerts, galleries, and museums in your neighborhood. Take advantage of your local library for books or for options to read on your e-reader. If you’ve already invested in a TV streaming service, splurge a little by renting a new movie through the service. The additional $15 you spend to rent it for your family and friends to watch is much less than paying $15 per person to see it at a theater (homemade popcorn costs less, too). Ride your bike; go hiking or camping in a nearby park; take long walks in your neighborhood; use free fitness apps to replace your expensive gym membership.

Inflation is a good time for all of us to revisit the classic concept of “need” versus “want”.

Do you “need” to drive to work every day, or could you take public transportation or join a carpool? Do you “need” salon-brand hair care products, or would the drugstore variety work? Some things you simply need; examples include: insurance, HSA/FSA, and retirement funds. Never cut these out of your budget.

Continue to invest.

This is especially true with your retirement funds. While the rates of return may be going down, it is important to continue saving regularly – especially for retirement. The financial market will always fluctuate but continuing to invest will offer you long-term stability.

One key to successfully managing and achieving your financial goals is to work with a bank you trust. Inflation will come and go; having a stable, trusted partner in your financial success is the key to managing risk. In Baltimore, the local bankers at Homewood Federal Savings Bank are your neighbors. When you succeed, our whole community benefits. Visit our Eastern Avenue office to discuss your options with one of our bankers. We have a full complement of services to help you achieve your financial goals.