Many Princeton area residents are feeling the crunch of inflation and recent increases in interest rates. Inflation has had a broad impact on food prices, gas, and normal day-to-day expenditures such as home maintenance. Interest rate increases make home mortgages, auto loans, and credit cards more expensive. Inflation has caused many of us to cut back on dining out, cancel or change vacation plans, or defer major purchases. It may also have reduced your ability to enjoy some of the other wonderful cultural and recreational activities available to central NJ residents with its proximity to New York, Philadelphia, the Jersey Shore, and the Pocono mountains.
Sometimes we all need to find some extra cash, either to handle an emergency, save for a goal, or try to improve our overall financial situation. Many of us are looking for ways to stretch a dollar as inflation upends our budget. Here are some ideas to help cope with inflation.
Make a budget and stick to it.
Budgeting is key to understanding where your money goes. Track your spending and make a budget. Once you have a budget, make it a point to monitor it and freeze your spending once you hit that number each month. This may not be possible in all cases, such as if you have an emergency car repair. But it can work very well for discretionary expenses such as entertainment and dining out. Given recent inflation, now is a good time to either prepare or review your budget. In many cases, you will find specific areas where you may need to make adjustments as a result.
Pay yourself first.
Even though inflation is impacting your budget, remember that it is important to continue saving for emergencies and longer-term needs such as retirement or education. When you create a budget, establish an amount – no matter how small – that you will automatically transfer to your savings or investment account from each paycheck, so that less of your paycheck is immediately available in your checking account to spend. If you don’t “see” it in your checking account, you are less likely to spend it. The Bank of Princeton and other local bank branches will gladly set up a savings account linked to your checking account to make for easy transfer. Online banks can also offer an opportunity to transfer into an investment account. Your savings and investments will grow as you add to the balance and will continue to earn interest or investment income. Over time, the earnings may be substantial.
“Needs” versus “Wants.”
Before making a purchase, ask yourself if what you intend to buy is something you need, as opposed to something you want. This will help to avoid impulse or luxury item purchases. More significantly, if your phone works well, do you really need to upgrade it to the latest model? Do you really need unlimited data from your cellular provider? Most of us have cable television and one or more streaming video or music services. How many do you really need? Review your viewing habits and cancel or suspend those you aren’t using. You can always start them up later, when the next “must see” show appears on Netflix, Disney+, or Apple TV. Taking advantage of your local public library can also save you money on subscriptions, books, and other media. Mercer County Library System and Princeton Public Library have excellent services – both online and in branches. Online services now include many magazines, books, and other media that can be read or streamed from any device.
When shopping, you can avoid impulse purchases if you ask yourself if the item is something you really need before heading to the checkout counter. You can buy things you want if your budget allows it but be honest with yourself. Don’t describe branded or luxury items as needs if there is an acceptable, less expensive or “prestigious” alternative. This is an especially good rule when buying clothing or shopping for a car. If you work, consider bringing your lunch. Think twice before using a food delivery service, as these costs have risen dramatically in the past year.
Grocery shop with a list.
Supermarkets are filled with things you really do not need displayed in a manner that entices you to buy them. If you make a list, and stick to it, you will avoid buying extra items. If you reach for something off the list, ask yourself if it is really something you need. When making your list, check for coupons and comparison shop brands. Our local supermarkets, like McCaffreys, Shoprite and Wegmans, all put out weekly circulars printed with coupons and sale prices so you can easily browse them before leaving for the store to make sure you’ve got everything lined up to shop smarter. Sometimes store brands are significantly less expensive than name brands for comparable items.
Shopping for groceries while hungry often makes it difficult to avoid the impulse to buy things not on your list. A 2015 study found that hunger promotes the acquisition of non-food items as well – in any store. The upshot of this is that you should never go shopping – for anything – on an empty stomach.
Avoid sales – unless you are sure it’s a deal.
A “sale” is a marketing ploy to entice you to buy things you don’t really need, or clear out unsold items. Just because something is marked as “On Sale,” doesn’t mean it isn’t available at a better price elsewhere. When shopping sales, make sure you understand what things cost. Ask yourself if the item is something you really need. Remember too that “sales” often occur several times a year, so you will likely get another chance to buy what you want.
Pay off your credit cards, highest interest rates first.
Credit cards carry very high interest rates. Avoid charging more than you can pay off, in full, by the due date each month. Paying on time keeps your credit good and raises your score; paying in full means you do not pay interest to the bank. If you do have credit card debt, pay it off as soon as possible. If you find yourself unable to avoid charging more than you can pay in full each month, stop using your credit cards. Pay with cash or a with a debit card instead.
If you’re interested in learning more about how to manage your finances long-term, DoughMain Financial Literacy Foundation (DMLFF), a Princeton area nonprofit, can help. Groups or organizations can register to use the FitKit Express Community or Express for Women programs online to offer to their communities or can request that DoughMain offer workshops in person or online to groups of 10 or more. FitKit University will be launched this fall and offered as a required course at Delaware Valley University. FitKit60- High School is being offered at Sayreville High School, New Hope Solebury High School and in consideration for offering at Boonton and East Side High Schools and others in NJ and throughout the nation. FitKit Express also meets new NCAA-NIL financial literacy requirements for student-athletes.
While it may seem overwhelming to overhaul the way you spend, starting with these simple steps, on your own or with some help, will set you up to know where your money is going and better control how you spend it.
Robert M. Church – Executive Director, DoughMain Financial Literacy Foundation. Education: MA in Educational Leadership from Rider University, a Bachelor of Science in Management Information Systems from Dominican College, and an AAS in Business Administration from Rockland Community College. Background: a former highly decorated New York City Police Officer and educator with more than 20 years of grassroots non-profit experience working with both national and local organizations focusing on vulnerable populations. He joined DoughMain Financial Literacy Foundation in 2015 and is the driving force behind FitKit Personal Finance Programs for schools and communities
Alfred Crumlish – Volunteer Contributor, DoughMain Financial Literacy Foundation. Education: Rutgers University, New Brunswick, NJ. Background: Retired Senior National Bank Examiner at the Office of the Comptroller of the Currency, where over a career of 40 years was involved in all aspects of bank regulation and supervision. In addition, for the past several years he has taught financial literacy workshops as a volunteer for various organizations. He joined DoughMain in August 2021 and is currently focused on developing original content for Fitkit and FitKit Express Community programs.