Money Has Value
Economists are trained to look at our economy at a big picture level. They know certain things by tracking the perceived value of our currency. That is, what one person or company is willing to exchange for standard items.
For you and I, there is the potential for negotiating. I will offer my old car for sale at a price that other cars like it have sold. Will you be willing to pay that price? Maybe yes or maybe no.
Economists look at commodity markets to project how many dollars you and I will have to spend on a finished product made from those commodities.
Grains and cattle exchanges sell the goods that will eventually become our groceries.
Currently, since supplies are short and Covid-19 has affected labor shortages, we are experiencing inflation. And fuel prices are high since it is in short supply due to the war between Russia and Ukraine. More money is needed to get the same value in exchange as last year.
Our money, what we exchange for goods, has less value than it did a year ago, at the time of this writing.
How Do I Get Around That?
As your money manager, you need to plan to work through these conditions.
First, you need to limit big item purchases, if possible, waiting for a sale with funds on hand. In small ways, buy a few extra canned goods to make meal preps easier to afford, when things are in short supply and prices are rising. Again, look for bargains.
Second, the Federal Reserve Bank is raising the interest rates to banks they supply money to. That means any bank loans and credit cards will have higher interest rates. So, try not to borrow money or buy on credit.
Third, reduce debt. I recommend that anyway. However, with your purchasing power reduced, debt payments will cut into your current living funds even more. If you need to get a second job or start a side hustle to get extra money to pay down debt, keep it short-term, try to do it over a three-to-six-month period. Do NOT make that income a part of your ongoing budget.
Where Do I Keep My Savings?
There are many, especially the younger folk, who will read this and say, “I don’t have any savings!” My reply is you need them and need to plan to have them. Learn to manage your money.
You do have options for keeping your savings safe and available. If you have a checking account, there is usually a savings account attached to that. Your bank or credit union may have other accounts like a money market account to earn short-term interest. I will cover other avenues when I blog about investing.
Living “paycheck to paycheck” comes from a perception that you should be able to live at a certain standard of living. However, you must limit your spending to an amount less than your income.
Savings is so critical to your future. I know. I failed to save when I was young and it made decisions very difficult in hard times, like changing jobs, etc.
Because I failed to save when I was young, I had to pass on investment opportunities like buying a rental house with two apartments, where the rent would have covered the payment. I just did not have the savings for a down payment.
Opportunities will come your way. Will you be ready?
You Win When Others Give Up
I mentioned the rental property because the owner was old and getting out of the business. He gave me a great deal on the price because he sympathized with my being young and needing a little help. I hated to pass on that offer.
When difficult times occur, you need to be able to take advantage of deals. They will come.
If you can be patient, delay spending, work extra, and build your savings you will be ready.
Good deals will show up at garage sales and FB Market Place, etc. Renters will have to move quickly and leave behind stuff you might want. Be aware. Talk to landlords.
Be a shopper. My wife is. She hates to buy anything that is not on sale. Sales mean you are adding value to your hard-earned money!
Money Costs
Those sales are good unless you think buying those items on credit is your only way to do it.
Credit cards add costs to your money. You will pay interest every month when you do not pay it off.
Do NOT tell me you get points for using the card and pay it off in a short period of time. Few of us can do that. Things come up. And, by the time you forget to pay on time and incur a $45 late fee and your interest rate goes to 29%, you start to cringe and find yourself only making minimum payments. Suddenly, those items you bought on sale are costing you 50% more over the time it takes to finally pay off that part of the credit card balance.
Are you having fun with your credit cards? Do you like adding misery to your financial life?
Stop It!
Will Rodgers had a simple way to advise people. He said, “If you find yourself in a hole, stop digging!”
Changes Coming with Opportunity
If up to now you have failed to be a saver, I suggest you do more reading on ways to save. The time has come for you to change your habits.
I am a part of the generation that is getting out of the work force. We are retiring. And there is a big portion of the USA population in the process of retiring.
We Are the Boomers!
Industries have grown over the years as we went through life changes. However, my point is that part of the “Help Wanted” crisis is the natural reduction in the workforce from Boomer retirements. See The Forever Labor Shortage, by Abi Ito, at businessinsider.com.
That change will give you many new opportunities that I never had when I was your age. There will be many trying to retire who have rental property, businesses, service companies, etc.
Will you be ready to take advantage of those opportunities as they come? Now is the time for you to study, to save, and to build a plan to take advantage of this developing situation.
Manage your money. Learn to do it better. Build a system around the habit of saving with your future opportunities in mind.
Make some changes to your mindset. Build a better mindset for money!