As inflation continues to rise to historic rates, Americans feel increasingly anxious about their finances. And it’s no surprise, either; in February, consumer prices had risen 0.8% since January and 7.9% since February 2021. Gasoline costs account for almost a third of the increase, with national average prices exceeding $4 a gallon. Given these price hikes and the general uncertainty of the past few years, a lot of people feel like they’re falling behind financially. Keep reading to discover how much money Americans think they need to be economically healthy and a few tips to gain more financial security.
Feeling stressed about finances? You’re not alone
The past few years have left Americans feeling more and more financially unstable. Thanks to pandemic-related supply chain issues, inflation has hit record-breaking levels, translating to higher prices for consumer goods like groceries and gasoline. And while average hourly earnings are increasing for the first time in years, it’s still not enough to keep up with the growing cost of living. This economic situation leaves average citizens with less money in their wallets for everyday expenses — and people are starting to feel the stress.
According to the 2022 Wealth & Wellness Index, a report from the financial services website Personal Capital, Americans now believe they need to be making around $122,000 a year to feel financially stable. This desired annual income is more than double the national average. People’s perception of their own financial health has dropped as well, with only 34% of respondents feeling very financially healthy (compared to 48% last year). Unsurprisingly, Americans feel the biggest obstacles to achieving financial security are insufficient income and increased expenses.
Tips for a more financially secure future
Despite ever-growing inflation rates, there are still steps you can take to protect your financial future. Here are a few tips to help you manage your finances today for a more secure tomorrow.
Create a budget you’ll actually use
The first step to getting ahead financially is budgeting. Making a budget will help you analyze your finances and learn where your money is going so you can set realistic spending and savings goals. Use a simple system that presents your finances in a way that’s easy for you to understand. Schedule half an hour every week to review your budget and ensure you’re staying on track with your goals.
Start an emergency home maintenance fund
Surprise home costs can pop up at any time, so the best time to prepare for an emergency is right now. Set aside money for unforeseen repairs to cover things like malfunctioning appliances, broken pipes, and other emergencies. Having money already set aside for home maintenance can save you a lot of stress when an emergency does happen.
Refinance your mortgage
If you have a high interest rate on your mortgage, now may be a great time to refinance. Refinancing a mortgage involves taking out a new loan with a lower interest rate or more favorable terms to pay off your current balance. In doing so, you can lower your monthly payment and keep more cash in your pocket. While the window has closed for many homeowners, there are still some two million well-qualified homeowners who could reduce their interest rate enough to make refinancing worth it.
Don’t buy more house than you can afford
Are you planning to buy a new home soon? Before you start your search, determine how much you can realistically afford to spend on a house. Living within your means can help you spend less upfront and well into the future.
Pay down your credit card debt
One of the most common factors that prevent people from getting ahead financially is credit card debt. If this is an issue for you, take steps today to lower your debt. Set aside money in your budget to make extra payments, consolidate the debt at a lower interest rate with a loan or 0% balance transfer card, or work with a credit counselor.
Save for retirement
To ensure you’re financially secure well into your future, start saving for retirement as early as possible. If your employer provides a 401(k) plan, contribute what you can to it. Often, companies will match some or all of your contribution, potentially doubling the amount in your account. If your workplace doesn’t offer a retirement plan, consider opening and funding an IRA.
Most Americans feel anxious about their finances. With inflation far outpacing wage growth, people feel it’s becoming harder to get ahead. Though it may seem difficult right now, there are steps you can take today to protect your future financially. Create a budget so you can set realistic financial goals, try to pay down or refinance debts, and start putting away money now for surprise expenses and retirement.
