Hiding from inflation
The Federal Reserve is fighting it. The markets are fearing it. Investors are figuring out ways around it. Savers are delighting in it because they are finally catching up to it. I’m talking about inflation, of course.
However, for ordinary people living on low incomes or fixed incomes, it’s difficult to avoid the negative impact of inflation. Inflation squeezes budgets — whether for groceries or gasoline or heating this coming winter. You can only stretch a dollar so far. Then family budgets have to bend or break. And that’s the silent battle that many families are facing today.
While many retirees may find it frightening 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. They must seek help from food pantries and thrift stores.
For these low-income working families, inflation is a growing fog that envelops their daily life. Here are a few potential trade-offs that, while they are not exactly enticing, might free up some cash for daily expenses.
Credit card debt: The burden of high-interest debt is growing for many cardholders. But before your credit is ruined by missed payments, consider rolling over to a zero-rate card to give yourself some breathing room. You can find them at CreditCards.com/ balance-transfer. Some have extended periods as long as 15 months, during which you’re supposed to be paying off the balance.
The downside of this approach is that when interest payments resume, they are likely to be at rates as high as 29%. And you will be trapped. Worse, if you charged even more on your old empty card, you will have dug yourself a deeper, more expensive hole.
If you’re already in over your head, contact the National Foundation for Credit Counseling at 800-388-2227. They can work with your creditors to lower the rates and help you set up a low repayment plan.
Home and auto insurance: You might not have noticed yet — but you will at renewal time — that insurance premiums are rising sharply. You can’t go uninsured, but you likely can lower the cost significantly by opting for a higher deductible.
The downside to this strategy is that if you’re in a car accident or if your home catches on fire, you’re on the hook for a larger cost. Insurers set their prices knowing the odds of you having a claim. So by raising your deductible, you’re tempting fate. But it’s better than going completely uninsured.
Health insurance: Here’s a tough tradeoff for seniors. Medicare open enrollment season is upon us. Medicare Advantage plans are spending a fortune touting their all-in-one plans, which cover not only 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? Simple. They restrict your freedom of choice of physicians, specialists, treatments and hospitals. You are only allowed to use their contracted providers, who are compensated at far lower rates than the specialist you might prefer to see. Medicare Advantage is far less costly on a monthly basis. And it works well — until you get sick and want your choice of care. But it does save on monthly expenses.
Rent: Two people definitely can 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 stretched by inflation. Cohabitation has its drawbacks, and written agreements are important to making them work better. But if you have a spare room and carefully vet the roommate, it’s one way to hide from inflation.
Prices are still going up, especially on necessities. The best way to ease the squeeze is to figure out how to earn a bit more, providing a service that others need. The only alternative is to cut back on significant expenses, despite the drawbacks. And that’s The Savage Truth.