Editorial Team

Time Well Spent: Managing the Choices of Inflation

According to the GDELT Project, which monitors global media, mentioning “inflation” or “inflationary” began to spike in May 2021, with the three major cable news networks adding into their lexicon between 200 and 600 times per day. By January 2022, Gartner Finance discovered chief financial officers talked about inflation eight times more in quarterly investor calls compared to the same period in 2020.

While we cannot deny that prices are increasing at an alarming rate, today’s consumers have more choices than ever before on how to save money, build wealth, and ultimately live at a higher quality of life within their means.

Balancing Choices and Scales of Economy

When it comes to inflation, economists have a multitude of opinions and definitions on where it fits into our lives. The International Monetary Fund notes that in an inflationary environment, “unevenly rising prices inevitably reduce the purchasing power of some consumers.” Moreover, the sudden increase in prices can “distort purchasing power over time” for those receiving nominal income hikes yearly.

In turn, the IMF says monetary policymakers have several tools to curb inflation, from raising central bank interest rates, or reducing consumer prices by subsidizing certain goods through administrative price-setting. But what many consumers don’t realize is that they also have an incredible abundance of spending choices on everything from groceries and clothes, to dining and entertainment.

For example: During the last major recession, research lead by professors from Harvard University and the University of London discovered while overall drinking dropped, binge drinking increased, especially among younger consumers. The additional cost of going out or buying more alcoholic beverages cuts into a budget that could be spent on more rewarding experiences — like reading a book, playing a video game, or hosting a night in with friends — which last longer than a night on the town.

As we continue to progress, consumers will experience more choice and convenience within their lifestyles. Instead of driving to an office and spending money on food for lunch and gasoline, many companies are allowing employees to work from home, saving both time and money on commutes. And in major cities, choosing a home with easy access to public transportation or easy walks to grocery stores and retail shops saves spending on getting around.

Living Within Your “Personal Rate”

Although there is no shortage of ways to entertain ourselves, everything comes at a cost of both time and money. Both resources are limited, and cannot be recovered once spent. During a period of inflation, it’s critical to understand how to maximize time and money to our advantage.

The first step towards amplifying our resources is setting a budget which emphasizes your “personal rate.” The idea of a “personal rate” focuses on how we spend our money on living and entertainment expenses, and choosing the things that matter most. To determine your personal rate, start by evaluating the following:

  • Prioritize non-negotiable expenses: For many households, monthly housing, health care, and education bills (including student loans) are among the most important expenses each month. Every budget should ensure above all else, these bills always get paid on time.
  • Build wealth and reduce debt: Before anyone else gets paid, it’s important to pay ourselves. Setting money aside to build long-term wealth in investment and retirement accounts while reducing outstanding debt allows consumers to free up cash towards other goals.
  • Set experience goals: Every spending decision requires a sacrifice of something else. Going out for food and drinks three times per week takes away from money that could be used towards a vacation, home improvements, or new entertainment systems. Choosing lower-cost ways to entertain ourselves — like reading, gaming, or learning a new skill — can help users save towards the bigger, more meaningful expenses in life.

Bottom Line

While the headlines suggest that prices are going up and cutting into our wallets, the truth is we have a finite amount of time and unlimited choice in our consumption habits. By setting a “personal rate” and creating a budget that reinforces spending on experiences, consumers can create a path towards building wealth and beating inflation.

Unifimoney’s investment-as-a-service tools can help your customers make smarter decisions with their money and help them live a fulfilling life despite the pressures of inflation around us. Contact us today to learn how we can help grow savings towards what matters most.

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*Important information and disclaimers

The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.