2022 has continued to be the year of change. For many, the increase in consumer goods and services, or inflation, has been an unwelcome addition to their daily routine. Maggi Tax takes a look below at what consumers can do to combat inflation’s impact on their finances.
By definition, inflation is the loss in purchasing power due to the increase in the cost of goods and services within the economy. The Federal Reserve has held a long-term inflation target of 2%, which allowed for generally lower consumer inflation these past few years. But, when inflation starts to swell, the Federal Reserve can use a few tools like raising interest rates or selling treasury notes to offset this quick change to the economy. Both of these options alleviate pressure by raising the cost of borrowing, which causes businesses and local governments to spend less.
It’s true that we give inflation a bad rap, but it is a critical indicator of a healthy economy. Generally, inflation lags real gross domestic product growth and economic recoveries. When wages increase here in the United States, greater spending and increased prices follow. Historically, a return to a healthy economy can be predicated on inflation.
Having a love/hate relationship with inflation doesn’t make it any easier to tackle but there are a few ways to lessen the economic squeeze. Most financial planners recommend keeping 3 to 6 months in savings to assist with any unforeseen costs. This is also a great time to sit down with your family and talk about budgeting. What can be streamlined or canceled to lighten any financial strain? Lastly, revisit your budget goals. At Maggi Tax, our team can create a financial plan that includes college savings, retirement planning, and more.
For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Our goal is to implement customized financial plans that preserve and maximize your wealth management needs. Contact us here or call (727) 799-1701 to schedule your appointment today.