How to deal with inflation when you live paycheck to paycheck

The man stresses about his bill while his wife and son stand in the background.

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Inflation has hit Americans where it hurts the most: our wallets. Although inflation seems to be cooling off, it is still unsustainable for families that are barely getting by, and that is for many families. According to a recent LendingClub report, 61% of Americans were living paycheck to paycheck in April 2022, up from 52% in April 2021.

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Dealing with inflation while living paycheck to paycheck is not easy, to say the least, and one who barely survives has to ask himself: How do I meet my needs during inflation when I was already struggling before?

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GOBankingRates consulted finance experts for their best advice on dealing with inflation when living paycheck to paycheck.

Make a spending plan you can follow

“Have a spending plan in mind that you can follow,” said Levon Galstyan, a certified public accountant with the Oak View Law Group.

“For example, the 50-30-20 budget allocates 50% of your take-home pay for necessities like rent, mortgage, and food. Twenty percent goes toward paying off debts and investments, while thirty percent goes toward wants like dining out. It gives you a built-in mattress so that in case of an emergency, you can use your savings to pay for it. When budgeting, you should start by outlining your profits before subtracting your costs.”

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Dealing with ‘Icebergs First, Deckchairs Second’

“Most people focus on small expenses in their lives hoping they will move the needle,” said Brent Weiss, CFP, ChFC, co-founder and chief evangelist of Facet Wealth.

“While it’s important to keep track of small expenses as they can add up, the reality is that the biggest expenses are the ones that can have the biggest impact and either improve our quality of life or sink our finances. Start with the big three expenses (housing and utilities, transportation, and food) and look for ways to save money. Can you lower your utility bills? Can driving or carpooling be reduced? Can you cook food at home and dine out less? Look at the most important items first, and then look at your daily habits to really cut down on those monthly expenses.”

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Optimize your mortgage costs

“Your mortgage can be one of your most significant out-of-pocket expenses,” said Steve Wilson, founder of Bankdash. “How can you decide if refinancing is advantageous? First, consider the rates you might be eligible for based on your income and credit score. Compare it to your current interest rate after that. You can do the math with the help of a mortgage refinance calculator.”

Wilson continued, “Then consider how long you plan to live there and how much closing costs would be if you refinanced your mortgage. Refinancing could be advantageous if you intend to live in the house for at least long enough to break even, which is the point at which the interest savings exceed the closing costs.”

Take a look at your taxes

“Three out of four Americans get a tax refund and the average refund is more than $3,600,” Weiss said. “While a refund is certainly better than owing money to Uncle Sam, the average family lends money to the US government, interest-free, for months. $300 per month can go a long way toward shoring up monthly expenses and/or paying off debt. Take a good look at your taxes to see if it makes sense to adjust your withholdings. If you always get a refund or there’s been a major life change (like buying a house), you may be leaving a lot of money on the table each month.”

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Reduce prescription drug costs

“See if you can lower your prescription costs,” said Al Kingan, JD, CLU, ChFC with MassMutual. “Ask your doctor if a generic version is available. Use GoodRx or similar services. They can be cheaper than health insurance copays.”

Reduce your data plan

“A recent study found that 90% of mobile users spend money on unnecessary unlimited data plans,” said budgeting expert Andrea Woroch.

“If you have an unlimited data plan, look at your actual usage over the past few months and check plans with your wireless carrier to see if there is a less expensive plan that matches your actual needs. Another option is to consider alternative carriers like Mint Mobile, which charges just $15 a month for talk, text, and data when you buy 12 months of service in bulk.”

review subscriptions

“Take a deep look at your subscriptions and entertainment expenses,” said Kevin Chancellor, financial advisor and CEO of Black Lab Financial.

“What I’ve found, in my own personal budget and some of my clients’, is that we ditched cable many years ago to save on the monthly cost; however, we had so many different subscription services that we got to the point where we were paying more than we were originally paying for cable service.”

Join a Warehouse Club and buy in bulk

By joining a warehouse club like Costco or Sam’s Club, you can potentially stretch your dollars.

“You can save a lot of money by buying items in bulk and using coupons,” said Andrew Lokenauth, founder of Fluent in Finance. “If you have the space for it (freezer, pantry, basement, etc.), it’s usually cheaper per unit. Always buy basic household items in bulk. You can save hundreds over the course of a year. Anything that is non-perishable or has a very long shelf life that you will always need/use, such as toilet paper, beans, rice, flour, canned goods, etc.

He added: “Buying in bulk not only saves money, but also creates convenience. You don’t have to leave your house as often and you save time and gas money on extra purchases or trips to the store.”

Sell ​​unwanted belongings

“If, like most, you’ve accumulated stuff over the years, now might be the time to sell some stuff to help add some extra cash to the pot,” said MoneyNerd’s Scott Nelson. “You can easily sell things on sites like eBay or Facebook Marketplace.”

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About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles via Brooklyn. Her work has appeared in Vogue, The Atlantic, Vice, and The New Yorker. She is a frequent contributor to NBC News and Publishers Weekly. His 2013 debut novel “Fifty Shades of Dorian Gray” received praise from Fred Armisen and Ken Kalfus, and was published in the US, UK, France and Russia, though no one knows what happened to the Russian edition! She has an affinity for Twitter.

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