While inflation is at the highest it’s been since the early 1980s, many people — especially those living paycheck to paycheck — may be struggling to save any money at all.
Inflation is likely to remain high, with most economists polled in Bankrate’s Second-Quarter Economic Indicator survey predicting inflation will remain as expected or heat up even faster. With consumer prices sky-high, inflation continues to outpace wage growth and savings rates, making it difficult for Americans to find room for saving.
Still, it’s important to save — or avoid spending what savings you have — especially with the potential for a recession. Until the beast of inflation is tamed, there are some strategies you can take to soften its blow on your finances, protect savings and develop better financial health overall.
1. Budget for savings first
Often it can be easy to spend your income and then run out of money for savings before you’ve even realized it. That’s why it’s important to plan ahead and figure out how much you can comfortably save from each paycheck — then put that amount into savings from the outset.
“If you put that savings first, you can find a way to live within the bounds you set for yourself,” says Sam Lewis, founder and financial planner at SJL Financial in Wilmington, Delaware.
The amount you should save depends on a couple of variables, including your total income, household size and what savings goals you have. A common budgeting strategy is the 50/30/20 rule — 50 percent of your income goes to needs, 30 percent to wants and 20 percent to savings.
However, it may not be realistic for many, especially those living paycheck to paycheck, to stow away 20 percent of their income. What’s important is trying to cut down on expenses and outline a plan to contribute some money at the beginning of the month to a savings account, with the goal of not tapping into that savings for daily spending.
There are various budgeting apps that can help you stay on track with a savings strategy and help save on time, too. Some of these apps even analyze your income and spending to help you determine how much you’re able to save each month.
2. Set spending priorities, focus on paying down debt