The cost of living just keeps rising, as most Americans are well aware. In this inflationary time, financial advisors say, there are at least three financial moves you can make right now to navigate responsibly through it:
- Make the most of your cash – While some people are finding it difficult to save, others are letting too much cash sit idle instead of putting it to work. The national average interest rate on savings accounts is now just 0.17%, according to the FDIC, while inflation is measured at over eight percent. It may be wise to use savings to pay down high-rate debt, like credit card balances, right now – or earmark some of it for a future vacation by stashing it in a certificate of deposit. (Many are currently paying three percent or more.) If you still prefer to squirrel your cash away, look for federally insured online savings banks offering more than what brick and mortar banks are paying.
- Review your homeowner’s insurance protection – Is your homeowner’s insurance protection keeping up with soaring building costs? Make sure you are protected against loss. Ask your insurance company to review your coverage and recommend appropriate limits – and double-check by talking to an appraiser or contractor who can give you an estimate of rebuilding costs per square foot in your area.
- Do a tax projection – If you got a raise this year, you could be at risk for what some financial advisors call ‘bracket creep’ – being pushed into a higher tax bracket and looking at higher tax bills even if it seems you’re barely keeping up with inflation. In a year when the standard 2022 deduction and tax brackets increased by only about three percent, that can happen if, say, you got an eight percent pay increase. Calculating your likely 2022 taxes now can alert you to such an issue and give you some time to adjust – perhaps by putting more money into pre-tax retirement accounts or adjusting your W-4 withholding.
