Inflation is bad – and it can get worse before it gets better.
the main points
- Inflation has spread since mid-2021.
- The omicron variable can drive inflation levels even higher for one big reason.
It’s no secret that it’s getting more and more expensive just to work these days. Everything from gas to groceries to utilities costs more than usual, and we can thank inflation for that.
To be clear, inflation is not a new concept; It is normal for the cost of goods to rise over time. The problem, however, is that inflation levels have skyrocketed in a relatively short period of time, leaving consumers in a bind for far higher costs than their paychecks can easily handle. In fact, right now, those who live on the paycheck to paycheck with no money in savings risk getting into serious debt just to make ends meet.
Now at some point, inflation levels will likely start to fall. But this may not happen for some time. Indeed, the National Retail Federation’s chief economist, Jack Kleinens, recently issued a warning about inflation — that things will get worse before they get better.
Why inflation levels may continue to rise
One of the main reasons behind the rising cost of consumer goods is that the demand for them has outpaced supply. Now, when we dig a little deeper, it’s easy to argue the argument that rampant inflation is actually a sign of a healthy economy because it suggests that consumers finally have more money to spend and simply need more products to spend.
However, the problem is that those who live from paycheck to paycheck cannot easily absorb the slight increase in expenses in the way that the high-income or wealthy can. And so a lot of people are hurting financially right now, despite the strength of the economy.
Meanwhile, in case you haven’t noticed, there’s an annoying little type of coronavirus called an omicron that has been fueling an increase in cases. Kleinins believes that the current situation of the Corona virus will lead to a slight increase in the number of people staying at home and spending more money on goods, as opposed to personal entertainment. This, in turn, can put more pressure on supply chains and create a larger gap between supply and demand. Results? higher prices.
Of course, the good news in all of this is that so far, omicron has not resulted in any of the severe economic shutdowns we saw early in the pandemic. Widespread unemployment may be less of a concern as the country struggles with an ongoing outbreak. But if Kleinens is right and inflation rises even further, many people will be at risk of getting into serious financial trouble in the near term.
How to fight inflation
If inflation is flipping your money, there are several ways to combat it. First, get the budget. Doing so should help you track your spending and identify ways to cut costs.
Next, look to increase your income with a second job. If you’re able to earn an extra $50 a week with a side hustle, it can help you make ends meet without having to dip into your savings or carry balances on credit cards.
And speaking of credit cards, be selective with the cards you use. If you’re spending more than ever on essentials like gas and groceries, you should use the cards that offer the most rewards and cashback for these purchases.
At some point, the cost of consumer goods is bound to start to shrink. But it is important to prepare for the fact that prices may not have reached their peak, and to take steps to combat inflation as best as possible.
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