Inflation Is Costing the Typical Household an Extra $300 a Month, Data Shows
- New data reveals that inflation is forcing the typical household to spend roughly $300 more per month than usual.
- Cutting back on costs and getting a side hustle might help reduce the effects of inflation on your budget.
If you're trying to cut costs right now, you're not alone.
It's hardly a secret that inflation has been rampant since mid-2021. And unfortunately, the cost of living could continue to rise.
In fact, many people are being forced to dip into their savings each month just to make ends meet. But what about people who don't have money in savings? Unfortunately, they risk landing in dangerous debt due to circumstances outside their control.
The average U.S. household is now spending an additional $300 per month due to inflation, according to recent data from Moody's Analytics. That number is based on the latest reading from the Consumer Price Index, which rose 7.9% in February on an annual basis.
And the worst part? Moody's says things could get worse before they get better. In light of that, you may want to consider taking the following steps to get through these tricky financial times -- and to avoid gaining a pile of debt in the process.
1. Slash your housing costs
There are certain living costs you may not be able to cut back on. For example, you need to feed your family, and while you can aim to buy less expensive goods, at the end of the day, there's a minimum amount of food you need to provide. Similarly, if you use your car to get to work, you can only reduce your fill-ups by so much.
But you may be able to spend less money on housing each month, which could go a long way toward freeing up cash for other bills. One possibility, if you rent a home and live alone, is to try getting a roommate. If you're a couple who rents and has a spare bedroom, you can go the same route. And if you're a family that owns a home, you can look into renting a portion of it out, like a finished basement. Having someone else chip in for housing expenses could make it easier to pay for things like food and fuel.
You can also look into refinancing your mortgage if you think you're eligible for a lower rate on your home loan than what you're paying today. Although mortgage rates are up this year, they're still fairly competitive from a historical standpoint.
2. Limit nonessential spending
You need to put food on the table at home and travel to and from work. But you don't necessarily need to pay for cable TV if money is tight.
Difficult as it may be to cut back on leisure spending and entertainment, it might be worth it temporarily. Doing so could spell the difference between having to carry a credit card balance at the end of the month or not. It's worth taking a look at your budget to see if there's room to cut back on something you don't need (or don't use a ton), even if it's just for a little while.
3. Get a second job
The U.S. economy is in pretty good shape these days, at least from a labor market perspective. And that extends to the gig economy.
If money has gotten increasingly tight, it may be time to look at supplementing your income with a second job. The good news is that there are many flexible side hustles that allow you to set your own hours and work when you can. If you have childcare constraints, for example, you may be able to find a remote gig or work a few hours outside the house at a time when a partner or friend can look after your kids.
There's no question about it -- it's getting harder and harder for the average U.S. family to pay for basic expenses. It's important to do what you can to avoid debt during this extended bout of inflation, even if it means having to make some sacrifices along the way.
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