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We need to discuss how to fight inflation.
Because our society doesn’t explicitly value financial literacy, there’s pressure on Americans to take a do-it-yourself approach, if you will. To understand personal finances and exercise some control, we read books, listen to podcasts, consult advisors, etc. All of this is important work that can really help, but alas, financial literacy in itself is not necessarily the ticket to financial solvency and peace of mind.
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There are other serious financial issues holding us back that need to be tackled head-on. We spoke with finance experts to understand some of the biggest hurdles Americans face when it comes to budgeting and got answers on how to overcome them.
Blaming your problems on your state of mind without addressing the trauma
“One of the biggest issues I see holding people back in their personal finances is thinking their money troubles are a result of their financial mindset,” the business coach said. ryan drake. “It is often popular to teach that overcoming financial problems requires the use of positive ‘Law of Attraction’ affirmations, visualizations and platitudes; however, a lack of money is not due to his state of mind. You cannot think of poverty. It is a lived experience that is embedded in someone’s body and it is something that someone has lived and experienced. Simply suggesting that one does not have a “money-friendly mindset” is misinformed. »
If we are serious about healing past trauma with money in order to make good decisions in the future, we need to acknowledge that trauma rather than denying it and ignoring it. And we have to name the source.
“Once we identify the trauma and its impact on our financial well-being that has created a negative or poor relationship with money, we can then work towards healing and ensuring that our nervous system becomes more regulated at over time,” Drake said. “When our nervous system is calm and we have processed our trauma, our whole relationship with money has the power to dramatically transform from an empowered place of decision making – and not uncommon.”
Not budgeting properly
“One of the biggest contributors to money problems is not budgeting properly,” said Becky Neubauer, a millennial money expert. “When you don’t have a plan in place, it’s very easy to overspend and create financial stress. The problem here is that there’s a stigma that budgeting limits your lifestyle or that it’s hard to do, but it’s not.
“Creating a budget can actually help you live a more fulfilling life because you’ll have more money to spend on the things that matter to you,” Neubauer explained. “The first thing to realize is that you’re not alone in this, and because of this, there are plenty of resources to help you get started.”
Neubauer recommends using budgeting tools like Mint or Personal Capital.
“These tools allow you to connect all of your financial accounts and provide you with detailed insight into where your money is going,” Neubauer said. “It can be an eye-opening experience and it will help you start changing your drinking habits. Spending wisely is the key to successful budgeting.
See: The Complete Spending Guide
Underestimating the erosive effect of inflation
“Underestimating the erosive effect of inflation is another major financial problem,” said Caitlyn McGonigal, outreach coordinator for Annuity.org. “While a moderate and consistent level of inflation is generally considered a sign of economic health, rapid price increases can have a destabilizing effect on an economy and put hard-earned savings at risk.”
Fortunately, there are ways to personally mitigate the powers of inflation, as McGonigal pointed out:
Maintain a flexible budget. “Temporarily adjusting living expenses downward during difficult times can be very beneficial,” McGonigal said. “The ability to change your lifestyle can preserve your savings and bring you some comfort.”
Invest part of your savings in assets intended to protect you against inflation. “Topping the list are Treasury Inflation-Protected Securities (TIPS), which are high-quality inflation-indexed US government bonds,” McGonigal said. “Two other proven inflation hedges are gold and real estate. Another asset class that definitely deserves a place in your portfolio is large-cap, growth-oriented stocks. and the pricing power of these types of companies can enhance the real value of your portfolio over the long term.”
Living paycheck to paycheck
“The number one financial problem that holds people back is living paycheck to paycheck,” said Clayton Wood, CFP, managing partner at CB Wood Financial LLC. “Most yearn to travel more, pay for their education, buy a bigger house or a nicer car and can’t because it doesn’t fit their current budget.”
According to Wood, there are two solutions to deal with this problem: either find ways to earn more income, or better prioritize your values.
“Due to the current job market, people have a great opportunity to seek a new position that offers higher income than their current occupation,” Wood said. “Because of this, employers know how difficult it is to retain an employee. Today more than ever, the employee has a lever to ask his employer for a raise.
Full-time employees should also consider taking a side hustle if it is manageable for them and if they feel the extra time spent is worth the extra money earned.
“If earning extra income isn’t possible for your situation, we advise you to prioritize your interests,” Wood said. “Classify your wants and needs to analyze what is most important in your life. If having a big house is at the bottom of your list, it might be time to downsize, so you can afford more of what’s at the top of your list.
Pay for old subscriptions you no longer use
“We’ve all had long-forgotten subscriptions or ones that went up in price without you realizing it,” said Danielle Holden, family office advisor at Breakaway Bookkeeping + Advising. “It’s important to check your subscriptions and make sure you’re actually using them and not just wasting money. Review your last 12 months of credit card statements and take a close look at your recurring subscriptions.”
Ignore the taxman
We saved this one for last because it’s a doozy!
“I see clients who owe money to the IRS,” says CPA and author Wendy Barlin. “They either don’t open the letters from the IRS, hoping the problem will go away, or they open the letters and then put them in a pile never to be processed.”
This potential nightmare can be avoided with a simple phone call to the IRS.
“The IRS will offer payment plans with much more reasonable interest rates than a credit card,” Barlin said. “Just make the call, fix the problem and then you can get on with your life.”
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