It’s halfway through the year, how’s your money holding up?
According to Forbes, it’s not looking too good for an estimated two-thirds of Americans who are running through their savings to stay afloat.
Americans have racked up roughly $2.5 trillion in extra savings during the pandemic, Forbes noted. During a time when many non-essential workers worked from home, costs like daycare, transportation, lunch orders and other expenses plummeted. Not to mention gas prices dipped to low prices.
Yet today, it’s a different story. Those rainy-day funds have shrunk quite significantly as more and more people are using their stashed cash “to deal with the worst inflation in over 40 years,” the article noted, also mentioning another problem – growing consumer debt. This debt is at a whopping $266 billion which has tracked from the fourth quarter of last year to the first quarter of 2022.
According to the U.S. Bureau of Labor Statistics, from May 2021 to May 2022 the Consumer Price Index for All Urban Consumers increased by 8.6 percent — the largest 12-month hike since December 1981, nearly 40 years ago.
NBC News reported that financial experts note that inflation is caused by three main factors: quickly rising labor costs, high energy prices and interest rates.
“Each one pushes the cost of everyday consumer goods higher, and it will take a complex set of forces to return to pre-pandemic normal,” according to the article. The article went on to that, according to Jayson Lusk, a professor and the head of agricultural economics at Purdue University, that with many leaving their jobs, many from lower-wage fields, the increasing cost of labor is a notable result.
LaTrice McClendon, community president, Community Market Executive of Detroit for Huntington National Bank, said that the rise in gas prices and groceries makes it clear that inflation is “real” and poses a financial risk for people in Michigan – unless they take proper precautions.
“There are ways to mitigate the risks during interesting times like this,” she said and went on to provide tips to do just that.
To be the most financially prepared, people should revisit their cash position.
“As goods and services have increased in cost, it is important to have strong cash flow and access to cash, if you need additional funds to cover higher expenses,” McClendon said. “One way in which you can access cash is to leverage assets, such as the equity in your home or your taxable investment portfolio. Even though interest rates have risen in the past few months, they are still low by historical standards. Your community bank can help you evaluate your personal balance sheet to determine the best course of action.”
McClendon added that “many people” are concerned about the decline in their investment portfolios since the beginning of the year.
Is the current state of the financial markets keeping you up at night?
“Fear is a powerful motivator and can lead us to make rash decisions, such as selling stocks when the market is low,” McClendon said. “If you have enough cash or cash flow for the next 12 to 18 months, you should feel confident that you can ride out the current market volatility.”
McClendon said that now is a great time to re-evaluate your investments to determine if the current mix of securities (cash, stocks, bonds) continues to meet your goals and objectives.
“Engage a financial advisor, if you don’t already have one, to prepare a financial plan for you,” she said. “It will help you determine if your investments are in alignment with your short, intermediate and long-term goals. A great advisor can also make other suggestions that will help you enhance and protect your wealth.”
Connecting with a local bank or financial advisor can provide those prepared financially with the confidence you need to feel financially secure in uncertain times.
For those not on the best financial footing, they should give their financial portfolio a once over.
Centuryss.com wrote in an article, Second Half of the Year Day – Time for a Financial Check, that the pandemic has notably been tough for everyone, and starting to get on track of finances is the starting point among other steps:
- Review your current budget.
- Review your goals.
- Be mindful of debt.
- Remember unanticipated expenses.
- Maximize tax savings.
- Don’t forget retirement or savings accounts (pour as much money as possible into them and invest).
Moneyfit.org agrees and says a budget is everything.
“Following a budget increases the likelihood that I’ll take care of my financial priorities first, such as housing, food, savings and transportation,” according to the article, which adds living within a budget allows for avoiding excessive debt, establishing regular investing habits in preparation for retirement, feeling in control of finances, making more than monthly minimum payments to credit accounts, credit cards, mortgage auto loans and more.
“Budgets are simply plans for how you would prefer to spend your money. Most budgets align to a monthly plan for simplicity’s sake, but you can create a weekly budget, a twice-a-month budget, a quarterly budget, or an annual budget,” the article noted. “When budgeting your income and expenses, make sure to prioritize your critical wants below your survival needs but above your lifestyle choices. Like the case of housing under survival needs, calling a vehicle a critical want does not justify getting into a loan you can hardly afford or which exceeds your ability to pay.”
Businessman Kenji Lemon, owner of Detroit-based One Stop Property Maintenance LLC, pays himself first.
Lemon told the Michigan Chronicle previously that he started his company in 2006 and he had a particular vision in mind: build wealth for self and his community.
“For a long time I’ve been focused on being prepared for the future,” Lemon said. “I’ve seen what happens to family members that don’t have savings for health issues or a nest egg for life post-retirement. That’s made me anxious to not repeat those decisions,” he said. “When I was in my teens my focus was on chasing skirts and trying to get rich. In my 20’s I started thinking more about retirement, social security and how I could take advantage of every program to increase the amount of money I had in my nest egg.
“It wasn’t until I had my first child that I took seriously the notion that I needed to think about what resources and funds I could leave for the next generation to work with,” Lemon said. “Since then, I’ve worked to improve the foundation that my kids will be able to work from.”