5 Ways to Cope When Your Cost of Living Rises
It is normal for prices to gradually increase over time. But lately much of America has felt unable to keep up with the dramatic increase in the cost of everything from shelter to food and transportation to health care.
Nearly half of people believe the number one threat to their financial future is the rapidly rising cost of living, according to a survey by TD Ameritrade.
So how do you cope when your cost of living goes up? Here are the best ways to make sure you don’t fall behind, no matter what your situation.
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1. Create a new budget
Your budget is the foundation on which you can build the rest of your financial life. When the cost of living goes up and your financial situation changes dramatically, budgeting can make your life easier.
If you don’t have a budget yet, there are as many budgeting methods as there are types of people, so pick one that best suits your situation. You can also use a budgeting app to automate the whole process.
If you already have a budget, you can enter and adjust the numbers to reflect your current cost of living. Also make sure your income is up to date so you know exactly how much is coming in and going out.
To really cut costs, manually go through the last few months of your bank statements, add up your monthly expenses, and categorize them. This process will let you know exactly where your money is going, which is essential for the next steps.
2. Reduce discretionary spending
As you go through your monthly expenses, you may come across a few surprises here and there. Maybe you spent more on food delivery than you thought. Or maybe you’ll wince at all the money you’ve spent on gas when you see how many trips you’ve taken to Target.
Start cutting back on some of your unnecessary spending. For example, you can cut take out and restaurant meals for a month. Planning ahead before you shop will help keep your total under control – grocery delivery apps like Instacart are great for this as they offer a free pickup option. Avoiding in-store purchases prevents you from picking up items you don’t need.
If you’ve already hit a minimum budget and can’t cut spending any longer, the next steps might help.
3. Cancel subscriptions and negotiate invoices
Subscriptions often sneak into your budget and hide there, eating up your money without you even realizing it. Try to identify all of your recurring payments, whether monthly, quarterly, or annually – services like TrueBill can help you do that. If you’re paying for more cable channels than you watch, consider switching your subscription to a new package. Or if it’s not something you use regularly, maybe it’s time to roll back.
Even if you don’t have a subscription, you might be paying unnecessary fees for things like your bank account or credit card – consider upgrading to a free checking account or a credit card with no annual fee. You can also negotiate recurring bills like insurance payments or lower services like your cell phone plan. If you have credit card debt, consider negotiating a lower APR or considering debt consolidation to lower your monthly payments.
4. Use your talents to increase your income
If you are unable to negotiate the raise you deserve at your job, it may be time to consider parallel work. Consider using a skill or interest that you have to earn some extra cash at the same time. Or consider developing a new skill that could help you increase your bankroll.
If you love to drive, download audiobooks and fill in the gaps in your schedule as a delivery or carpooling driver. Are you a domestic animal? Websites like Rover will put you in touch with pet sitting concerts in your area. For a long-term solution, look for positions in your industry or workplace that meet your compensation goals, then figure out how to get the skills and experience you need to land those jobs.
Don’t rely on government assistance, especially if you are on low income or if your pay or hours have been cut. It is worth seeing if you are eligible for SNAP benefits. You can also claim unemployment in your state.
5. Consider moving
If you’ve taken steps to manage your expenses and increase your income and your budget is still tight, it might be time to consider a move. While moving is never easy, and sometimes isn’t an option, there are plenty of places that offer a low cost of living coupled with relatively high average incomes for flexible people. These even include large cities like Austin, TX and Minneapolis, MN.
Whatever you have to do, taking steps to create space within your budget is always worth it. Whether you want to save money for an emergency fund, have a great vacation, or spend more time with your family, taking the stress out of trying to make ends meet lets you focus on more fulfilling goals.