Americans Report Worsening Finances: 7 Ways To Make Sure You’re Not Among Them

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The stock market is high and the job market seems steady, yet per recent polling, Americans are reporting worsening finances. Many factors play into people’s financial difficulties, like faulty financial literacy and poor money management skills.

However, we can’t ignore the fact that inflation is putting a squeeze on household budgets unlike anything we’ve seen in 40 years, according to Ron Stefanski, a business thought leader, college business professor and founder of BusinessGuru. “As prices soar for daily essentials, many tell me they’re struggling just to stay afloat,” he said.

Here, Stefanski and other experts explain what you can do to avoid the plight of these struggling Americans.

Tackle High-Interest Debt

“Unfortunately, this cost of living crisis could not come at a worse time for Americans saddled with high-interest credit card debt,” said Stefanski. “A part of my mission is providing practical guidance and strategies to help everyday people get their financial houses in order, especially during periods of high inflation. A large part of that role means helping individuals and families tackle their costliest debt to withstand rising living costs and economic volatility.”

He urged that tackling high-interest debt should be a top priority for everyone, especially those in tight financial spots. 

“Interest costs drain monthly budgets and leave little room for error when prices are rising rapidly. Getting aggressive about paying down credit cards and other loans with double-digit interest rates is key to freeing up funds and reducing exposure to future rate hikes,” said Stefanski. 

Stefanski said paying even $25 to $50 more than the minimum monthly significantly shortens repayment timelines and saves on interest. He explained that when interest rates on credit cards and other variable-rate loans are near 20% or higher, it’s akin to throwing money away each month. 

To give a sense of scale, he outlined that on a $5,000 credit card balance at 20% APR, just paying the minimum of around $125 monthly would take 30 years to pay off and cost over $16,000 in total interest paid.  However, bumping monthly payments up by a relatively small $25 to $50 cuts that timeframe in half. For example, paying $150 per month pays off that same balance in three years for less than $1,500 in interest rather than draining $16,000 over three decades.

He also advocates for targeting the smallest balances first while paying minimums on others, often called the debt snowballing method.

Adjust Your Investment Strategy

In a high inflationary economy, a practical money tip that many people might not immediately think of is adjusting their investment strategy to include assets that traditionally hedge against inflation, according to Mark Stewart, in-house CPA for Step By Step Business.

“One such strategy involves diversifying one’s investment portfolio to include assets like Treasury Inflation-Protected Securities (TIPS), real estate, commodities and certain stocks that have a history of performing well during inflationary periods,” said Stewart.

TIPS are government bonds specifically designed to rise with inflation, ensuring that your investment retains its purchasing power over time.

Additionally, Stewart said investing in real estate provides income through rent, which increases with inflation, while commodities like gold have historically been seen as a store of value when currency value declines. Stewart feels the trick is selecting stocks in sectors that are less sensitive to economic downturns, like consumer goods, utilities and healthcare, which offer some protection as these companies can still perform well when prices rise. 

“This strategy doesn’t require significant capital upfront; even small, regular investments in these areas can add up over time, providing a buffer against the erosive effects of inflation on your savings,” said Stewart.

Learn To Say No

Perhaps the simplest piece of financial advice, according to Finn Wheatley, a financial expert and risk analyst at The Small Business Blog, is to learn to say no. 

“More often, this can save hundreds or even thousands of dollars per year. With the constant sales and special offers thrown at us, it’s easy to spend on things we don’t really need just because the price seems good. But pausing to truly evaluate each purchase against our needs rather than our wants can prevent wasted spending,” said Wheatley.

For example, passing on an enticing 50% off sale on a $100 item you had no plans to buy originally saved you $50 already. Just by practicing more selective purchasing, folks avoid $500 to 1000 in unnecessary spending annually.

Renegotiate Bills

Wheatley said renegotiating bills also leads to major savings each month. 

“Calling providers to negotiate lower rates works more often than you may think,” said Wheatley, explaining that as little as a $20 monthly discount on cable and a $10 monthly discount on an insurance bill would save $360 per year.

“Internet bills are another area ripe for savings-even a $5 per month discount would be $60 annually back in your pocket. Based on my professional experience, I typically recommend people target saving $40 to $60 per month from negotiating bills. Over a year, that comes out to $500 to 700 in savings from this strategy alone,” said Wheatley.

Engage Money Mindfulness

Keisha Blair, behavioral economist and founder of the Institute on Holistic Wealth and host of the Holistic Wealth podcast, suggested “cultivating money mindfulness,” saying it’s important to regularly assess your financial goals, track expenses and identify improvement areas. 

“By staying mindful, you can make informed decisions that align with your long-term objectives,” said Blair.

She described how most of the money decisions we make, we do so mindlessly and non-strategically. 

“We need to be far more intentional with our financial decisions,” said Blair. 

Budget With Purpose

While budgeting is always important, Blair said that budgeting isn’t merely about restriction; it’s about allocating resources effectively.

“A Holistic Wealth perspective emphasizes creating budgets with purpose. Identify priorities, allocate resources accordingly, and leave room for personal enjoyment. This approach fosters a healthy financial mindset, reducing the likelihood of regretting spending decisions,” said Blair.

Seek Professional Guidance

Blair feels social and environmental factors all play a role in decision-making. Sometimes that means we can’t see all of our own financial missteps.

“Leverage this insight by seeking advice from financial professionals,” said Blair.

At the end of the day, the best way to keep your finances from worsening is to take a close look at them and keep up your good habits.

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