How to survive inflation

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How to survive inflation

The US Consumer Price Index (CPI) recorded 8.3% annual inflation in April, down from 8.5% in March. Housing, food, airline tickets, and new vehicles made up the majority of the CPI last month, according to the Bureau of Labor Statistics.

Americans today are experiencing the highest rate of inflation in the last 40 years, which means that for the first time in their lives, they are seeing a general increase in prices in the economy.

However, the reality of neighboring countries in recent decades is somewhat different.

In the last 40 years, Latin American economies have struggled with inflation. In 1996, in Mexico, the Indice de Precios y Cotizaciones (IPC) grew by 27.70%. It was even more dramatic in Brazil, where hyperinflation led to an increase in prices of 1,792.90% in 1989.

There is much we can learn from the experiences of neighboring countries during times of uncertainty, and it is crucial to organize finances in order not to break.

Step Down

While your finances may be in order, knowing your expenses in times of inflation will allow you to plan ahead. Knowing what a priority is and cutting small, non-essential expenses are crucial.

Consider paying cash instead of credit for mandatory expenses if there is a discount. The only time financing is a good option is when there is no interest, meaning that even if you pay monthly, the full price remains the same.

Do your research to find the best prices when buying groceries, and don't be tied to brands. Give preference to wholesale purchases because the prices are generally lower.

Finally, do everything you can to pay off debt that has a variable interest rate, meaning interest rates fluctuate based on a benchmark. A benchmark can be an inflation index, or the US interest rate set by the Federal Reserve.

What comes next?

Although inflation affects daily life and the economy, it is important to remember that this sticker shock was already expected. Because of the pandemic, the government released US$ 4.6 trillion in funds to guarantee income for the unemployed and financial relief for companies, which is one of the reasons for current inflation.

There are also a number of external factors contributing to current inflation, such as the war in Ukraine, Chinese lockdowns, and disruptions in global supply chains.

Banks in the United States are already predicting an economic recession, which occurs when the economy declines for several months. During these challenging times, don't let despair overtake you, and remember that this is just a phase that will soon end.

As someone who grew up in a country experiencing decades of inflation, I know that living a step below your dreams and potential is not easy or comfortable, but it's essential, so personal finances don't become even more fragile once this economic crisis is over.