Inflation rose picked up again in March, 8.5 % which could prompt US households to continue austerity measures.
The consumer price index, which measures the cost of a group of everyday items, rose 8.5% year-on-year in March, the US Department of Labor said Tuesday.
The report showed the highest inflation rate since December 1981. While wages have risen for many workers, they generally fail to keep up with inflation.
If price pressures continue, more than 50% of adults say they will cut back on eating out and consider cutting it further, according to the CNBC + Acorns Invest in You survey conducted by Momentive. The online survey of nearly 4,000 adults was conducted from March 23-24.
People are also cutting back on driving, subscriptions, and even canceling vacations to keep up with inflation, the survey finds.
“It was amazing,” said Tania Brown, a certified Atlanta financial planner and founder of FinanciallyConfidentMom.com.
Rising prices in mind
There was certainly some good news in the March inflation data.
Core inflation, which removes volatile food and energy prices, has not risen as much as economists had expected. This could mean that March will have been the peak of inflation, with prices finally beginning to moderate in the future.
Still, inflation is at its highest level in 40 years and prices of most consumer goods and services, including housing, food and energy, have risen.
That means many Americans are now spending more on essentials, tightening their budgets without any change in habits. People notice these walks and pay more attention. Nearly half of all adults said they think about rising prices all the time, while 55% of those with annual household incomes of $50,000 or less constantly check costs, the CNBC survey found.
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“Having your eyes on your spending is always a good strategy,” says Susan Greenhalgh, an accredited financial advisor who leads Mind Your Money in Hope, Rhode Island. “You really can’t understand what happens to your money unless you really look at it and measure it.”
Tracking what you spend can also help you tailor where you can cut back, she said, because inflation affects everyone differently. If you’re someone who doesn’t eat out much but is plagued by gas prices at the pump, driving less will probably help your budget more than skipping a few dinners at a restaurant.
It’s also important to keep an eye on and compare your spending from month to month, because prices are rising so quickly. You may need to adjust more often than in the past.
“The No. 1 goal, no matter what, is to protect the basic necessities of life, which are food, shelter, basic transportation and a medical base,” Brown said.
How to fight inflation?
Inflation could continue to rise, putting further pressure on budgets. More than 75% of adults said they fear higher prices will force them to rethink their financial choices, the survey finds.
The impact will be hardest for those with the lowest incomes who may be pushed into survival mode, Brown said. For those struggling to cut even more, she also said to check with creditors and lenders to see if you can delay payments.
Some people may also qualify for programs to help with utility bills, which could help with monthly expenses, she said. It may also be time to dive into emergency savings to cover your essential costs, if you need to, she added.
Those with higher incomes will also have to adapt, especially if they want to keep saving at the same pace they were before inflation picked up, Greenhalgh said.
Of course, if your budget is too thin, you may need to cut back to avoid debt. If so, both Brown and Greenhalgh recommend setting aside smaller amounts consistently to maintain the habit of saving.
“As long as you take things in the right direction, that’s great,” Brown said.
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Disclosure: NBCUniversal and Comcast Ventures are investors in acorns†