It’s been two years and most of us still leave home with a mask – but the virus isn’t America’s top concern. Studies show that most consumers feel their finances are more fragile than their health, despite record-high coronavirus cases.
Inflation is at a 40-year high, and the rising costs of living have many Americans stretched thin.
The 2022 Policygenius Financial Anxiety Survey says, “64 percent of Americans are feeling anxious about their finances.”
Most are either more worried or just as worried as last year. But when it comes to COVID, only 33 percent feel unsafe.
Because money has gotten tighter, people can’t afford groceries and often put off medical care – not great in the midst of a pandemic.
“While we only have so much control over outside sources of anxiety there are things we can do to ease our financial stressors,” Policygenius CEO Jennifer Fitzgerald says, “like making a budget, building an emergency fund, and securing insurance to provide peace of mind for you and your family.”
Those financial stressors can lead to self-destructive spending…
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The dangers of “Inflationary Psychology”
Buying in bulk now because you think you can beat rising costs is only going to set you back. Experts call this “Inflationary Psychology.”
In a nutshell, it means that consumers are more likely to spend money impulsively or make an immediate purchase when they think prices are rising, according to Investopedia.
Findings of Debt.com’s 2021 Holiday Shopping Survey mirror that behavior. In a national poll of 1,000 Americans, 40 percent knocked out their shopping at least two months earlier than previous years. Why? They feared rising costs and depleting supply chain issues.
That’s nothing new about periods of high inflation to Howard Dvorkin, chairman of Debt.com. Dvorkin has worked as a CPA for more than three decades. In his experience, Americans spend based on headlines and emotions.
“This is how inflation becomes your fault,” Dvorkin says. “While you didn’t start it, your own FOMO is dragging it out.”
It’s a self-fulfilling prophecy. When consumers start spending more, sellers know they can charge more.
How to break the cycle
If rising prices scare you, before rushing to buy a big-ticket item like a new car or TV, remember that being more conservative with your spending will help you in the long run.
Inflationary periods are a great time to take a step back and cool off spending. The more you’re able to cut down, the better.
Dvorkin says that when it comes to , getting ahead isn’t always about investing:
- Reassess your budget. Use apps like Mint and Tiller that connect to your bank account and help you manage your money.
- Make paying off your credit cards a priority. Inflation not only devalues your money but can also lead to increased interest rates.
- Speak to a financial expert. There are certified credit counselors at nonprofit credit counseling agencies who can give you free advice on tackling your debt.
“It’s true that you can’t control the prices,” Dvorkin says. “But you can control spending.”
