Inflation Is Costing the Average American $616.73 in Savings Account Withdrawals
- If you've been raiding your savings to cover higher living costs, you're in good company.
- You can break that cycle and start managing your expenses without having to dip into your cash reserves by spending smarter and increasing your income.
Higher living costs are forcing consumers to raid their savings at a pretty notable clip.
Living costs have been rising steadily since the middle of 2021. And there's a reason for that.
Last spring, millions of Americans received a stimulus check under the American Rescue Plan. Following that, the Boosted Child Tax credit put monthly installment payments into millions of parents' bank accounts.
All that happened at a time when supply chain disruptions were causing a notable shortage of goods. And that mismatch between available supply and demand spurred a period of rampant inflation that consumers are still grappling with to this day.
Not only are living costs still sky-high, but for months, tensions overseas drove the price of gas up to some of the highest levels today's drivers have ever experienced. And not surprisingly, these circumstances have forced many Americans to dip into their savings just to make ends meet.
In fact, inflation has prompted consumers to withdraw an average of $616.73 from their savings accounts to stay afloat, according to New York Life's Wealth Watch Survey. But while it's a good thing that Americans have had savings to fall back on, it's not a good thing to be raiding them consistently. And if that's a pattern you've fallen into, it's time to try to break that cycle. Here's how.
1. Get on a budget
Many people don't follow a budget because they don't find it necessary or worry that it will be too difficult. But actually, budgeting is both essential and easy.
With a budget, you can see what your various expenses cost you and identify opportunities to cut back. During periods when you're managing well financially, you don't necessarily have to cut back on the things you love. But if you're consistently dipping into your savings to cover your expenses, then it's time to set up a budget and then pinpoint some non-essential bills you can reduce, whether it's your cable plan, gym membership, or weekly takeout habit.
2. Fight for a raise
These days, many companies are desperate to retain employees, so it may be a good time to fight for higher wages if your pay didn't go up that much this year. For one thing, you can make the case for a pay bump due to inflation. But an even better bet might be to research salary data and present that to your boss.
If you can prove that a lot of people with your job title earn more than you, that alone could be your ticket to higher wages. And higher pay could make it easier to cover your bills while leaving your savings alone.
3. Get a side hustle
There are plenty of opportunities these days to go out and get a second job to drum up extra money and avoid raiding your savings. Is having to plug away at a side gig ideal? Probably not, especially if your main job is fairly demanding. But if you're tired of having to dip into your savings month after month to make up for a financial shortfall, then it's an option worth exploring.
We don't know when living costs will start to drop to more moderate levels. And unfortunately, we may be in for several more months of soaring inflation. If you'd rather stop hitting up your savings to make ends meet, then get yourself on a tight budget, fight for higher pay, and boost your income by doing work on the side. Those moves could make it possible to preserve your hard-earned savings so that money is there for you the next time a major financial emergency strikes.
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