HOUSTON, Texas (KTRK) -- The rising cost of housing, cars, and food is causing the inflation surge that is diminishing how far our paycheck goes. Economists predict the worst of it won't kick in until this summer for some core products, and high prices could stick around for as long as two years. But you do have a window of time now to draft a strategy to get ahead of the worst of it.
Here are five things you can do now if your family income is under $70,000 a year.
- Put off unnecessary expenses like buying a new car or remodeling your home.
- Consider a housing change or roommate. Perhaps you are renting when you should be buying, or vice versa.
- Cut back on nonessentials like grabbing coffee or lunch out, beauty services like nails, hair or teeth bleaching, and streaming services or extra apps.
- Rework your grocery list and reduce fish and meat in favor of more carbohydrates like pasta, rice, and potatoes. Try buying in volume with another friend or family.
Here are five things you can do if your family income is $70,000 - $110,000 a year.
- Pay down debts on credit cards, which often have an interest rate between 12 and 18 percent. Call them and ask if they'll reduce your interest rate if you've been a loyal and on-time customer.
- Make sure you have at least a small emergency fund because you may be surprised by an increase in a necessary expense.
- If you are investing, check to make sure your rate of return on bonds is keeping up with inflation. Otherwise, this might be the time to move to more stocks or a bond like Series I Savings bond by the Treasury Depart, which allows you to benefit from inflation.
- And if you are saving for your children's future college fund, this may be a place you can cut back for the time being if your children are young, and instead use that money for the family emergency fund.
- Re-evaluate your housing bill, this is not a time to overspend on housing. Most people can afford a home that costs twice their annual income if they have average debt, but three times their annual income if they have no debt. Don't lock yourself into a high bill and eliminate wiggle room for an unexpected expense.
Kafi Slaughter is a wealth advisor for Bank of America and she advises all of us to pay cash for everything we can right now.
"It's a mindset, it's psychological. If you're using cash, you're very, very aware," she said. "So my true advice is, know your cash situation and use cash to pay for things today. Because that interest and that interest rate essentially is eating up the cash that you're going to have to pay towards anyway."
For more tips on saving money during inflation, follow Gina Gaston on Facebook, Twitter and Instagram.