One of the biggest concerns single moms have in transitioning from corporate to full-time entrepreneurship is, “What will happen to my finances?” This is why I’m a big believer that creating an exit strategy is essential to successfully exiting corporate in a financially responsible way. A big piece of this is building up your savings account and creating solid finances. However, a barrier to this right now is inflation because it is increasing the cost of nearly everything. With the cost of everything going up, it can be more difficult to build your savings account which is essential to having peace in the transition. Also, with more money going to inflation-related price increases for bills and expenses, there is less money available to reinvest in your business which is also essential to being able to grow your business to the point where you are able to exit corporate (By the way, if you’re interested in exiting corporate, then check out the replay of my Transition Like A Boss Workshop).
According to the Bureau of Labor Statistics, the inflation rate climbed to 7.5% which is the worst it has been in 40 years. To put this in perspective, if you have an item that previously cost $100, it now costs $107.50. This is what is referred to as “purchasing power” – the amount of goods and services that you can buy with a unit of currency. As inflation increases, it effectively acts as a pay cut to your household because your money doesn’t go as far as it used to.
If you have money in the savings account, as inflation goes up, the value of your savings account decreases. With the average savings account paying only 0.06%, the interest rate you are receiving is way below the inflation rate, which means that you are experiencing about 7.5% balance reduction each year that the inflation rate remains this high. No you won’t see your balance reduce by 7.5% but what you are able to do with the money will decrease.
I’ve seen the impact of inflation in my own life. Gas prices are up 40% since January 2021 and I’m paying about $100/month ($1,200/year) more for gas. There was an item that I purchased recently that I paid $10 for 3-months ago that now costs $14. There is so much more I could do with that money instead of paying exponentially more for the things that I was already buying!
I wanted to write this post to help you to learn how to deal with inflation and minimize the impact it has on your life, because from the looks of it, inflation isn’t going anywhere soon. I’ve seen a number of questions posted online about the rising cost of food, gas, etc. and the impact it has on people’s budgets and household income. I’m hoping this post can help you gain some peace in your personal finances during this time of rapid inflation.
It’s so important that you develop a plan to manage this inflation so you can stay on track with working on your financial goals like building savings, repaying debt, paying tuition for your children, and working on your exit strategy from corporate, in addition to the everyday expenses you have as a part of managing your household.
Here’s what you can do:
Reassess (or create) your budget
Creating your budget is an important first step towards creating your financial plan. If you haven’t created a budget then this is a great place to start. If you already have a budget, now is the time to revisit it to identify any areas of cost reduction to make room for the increased costs in other areas of your life. For example, similarly to the KonMari method of decluttering where Marie Kondo asks if this item “Sparks Joy” to guide you in whether or not to keep or eliminate an item, I recommend doing the same in your finances. Assess your expenses and purchases based on the value and joy they bring to your life. If something brings you value and joy, then keep it. If not, eliminate it. This is one of my favorite tools to eliminate spending I no longer need, whether I can afford it or not. I’m focused on the value that things I spend money (and time) on bring to my life.
Increase your income
You can’t cut your way to financial freedom. At some point, you have to earn more money if you want to tackle your financial goals faster. The same is true during this time of inflation. Since your money isn’t going as far, now is the time to ask for a pay increase. We see the numerous “Help Wanted” signs for businesses so not only are businesses interested in hiring more people, they also want to keep the people they have. Therefore, ask for the increase. Document your contributions to the company, let them know how much you value your career, and present your case for why the salary increase is warranted.
Also, another option to earn more is to start a business to generate additional income. Think about the things that:
- Come easy or natural to you
- The things you love to do
- Dreams God has placed on your heart
- Things people repeatedly ask you for or say that you are good at
These are great places to start for coming up with a business idea. During this time of the Great Resignation with the mass exodus from corporate (4.5M people left their jobs in November, 2021), who knows? Your side business to earn more money to offset the cost of inflation may even turn into your exit strategy from corporate! (BTW – If you plan to exit corporate then I highly recommend that you create an exit strategy, and I teach you this in Transition Like A Boss.)
If you are a current business owner, then consider raising your rates. The cost of everything is going up around you. If you keep your rates the same, then you are bringing in less money to your household. A friend of mine owns a product based company, and because of inflation she raised the costs of her products for the first time in her company’s 8 year history. She could no longer afford to reduce her profit margins so she raised her rates. Amazon just increased the cost of Prime, because of the increase in inflation and transportation costs.
Another way to earn extra income is to clean up and declutter and sell items you no longer need. OfferUp, buy sell groups on Facebook, and consignment shops are great ways to sell items that are in great condition that you no longer need. The other amazing benefit is it reduces waste going into landfills and it also frees up space in your home.
Change your meal planning
The costs for takeout and also dining in have increased. I recently noticed that food from one of my favorite takeout places has gone up about $2/meal. A way to save is to eat more often at home and scale back dining out and take out purchases.
If you don’t dine out or purchase takeout often, then you may be wondering how you can save. My recommendation is to plan meals according to what is on sale. Also, the cost of meat up between 11-12% (the fastest rate of growth since December, 1990), therefore it’s possible to reduce the cost of meat purchased while still eating meat by making meat a smaller focus of the meal. For example, when I switched to grass fed and organic meat, the cost increase changed how I consumed meat. I began to cook meat more in stir fry, fried rice, and soup, where I could make the bulk of the meal rice, noodles, potatoes, and vegetables and make the meat more of a garnish or side to save money. This is a similar strategy that can be used now given the rise in the cost of meat.
Save on gas
This was an area I had to work hard to begin saving on since the inflation on gas was costing me about $100 more per month. I changed how I purchased gas. Previously, I used to purchase gas when it was convenient, but now I know where the lowest price is for gas and go there. I know it may sound like I’m going out of the way to save money on gas, but I realized that the savings was worth the trip. Also, after going out of my way for a couple of months, I asked myself, “how can I shift some of my purchases so I can consolidate my errands and trips closer to the location of the inexpensive gas so I don’t have to drive around multiple parts of town?” Asking myself this question helped me to further consolidate my trips beyond what I was already doing to save even more money.
Also, leverage fuel perks at your local grocery store. Some grocery stores allow you to earn fuel perks at the gas station when you purchase gift cards or spend at the grocery store. Enrolling in these perks programs can help to save money at the pump.
Another strategy is to use an app like GetUpside to save at the pump.
Credit Card Perks and Cash Back
I recommend using this strategy if you have the discipline to use a credit card and will not carry a revolving balance. I say this because the average credit card interest rate is 16.1%. Carrying a balance at an interest rate of 16.1% far exceeds the current inflation rate of 7.5% and any savings you would experience by leveraging cash back and perks will be eroded by the higher credit card interest rate.
Now that I’ve said that…
If you have a cash back credit card or rewards credit cards (beware of the fees associated with them and try to find a no-fee or low fee card), then this can be an amazing opportunity to earn cash back towards gift cards that you can use for spending or even earn cash back into your account. Essentially, you are getting paid for the shopping you are already doing.
There is also an app called Fluz that you can use to purchase gift cards in advance and then earn cash back on the gift cards that you buy at cost.
At the beginning of this post I spoke about the impact inflation has on savings accounts because the inflation rate is significantly greater than the interest rate being paid on savings accounts. I do caution you that emergency savings accounts need to be liquid because they are meant to cover job losses, unexpected expenses, and other sudden costs that come up so you need access to this money without penalties or fees (or the risk that you could suddenly lose a lot of value in a stock market reduction). Therefore, I do not recommend putting your emergency fund in the stock market, because of the potential loss due to stock market volatility. If you have other cash accounts, outside of an emergency account, then these are great candidates to invest.
“Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.” – Philippians 4:6-7
Prayer is powerful.
Prayer changes things.
Therefore, if inflation is hitting your budget hard, pray to the Lord to ask Him to:
- Give you peace
- Meet all of your needs with excess
- Reveal ways to earn extra income
- Guide you in your cost reduction
- Continue to reveal more of Himself so you can rest in Him as your Provider
The Lord is Jehovah Jireh (Genesis 22:14) which means “The Lord my Provider” in Hebrew. Philippians 4:19 also states, “And my God will supply every need of yours according to His riches in glory in Christ Jesus.” Prayer will help you rest in the promises of the Lord and trust that He will provide.
Don’t succumb to fear – Jesus is bigger
It can be scary to see the rising inflation and feel the impact on your finances. These increases are real and they have real-world impact. However, I want you to understand that we serve a great and mighty God. He is bigger than all of this. Matthew 6:25 says, “Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is life not more than food, and the body more than clothes?” Earlier in the chapter, Jesus tells us how God cares for the birds, how He adorned the flowers, and even cares for the grass and we are more important to Him than those things. Therefore, we can take comfort in the fast that Jesus loves us, He cares for us, and He provides for us. That’s a way bigger and better assurance than any other strategy we have. Yes, it is absolutely important to properly steward the resources that God has given us. It’s even more important to guard your mind and heart against the panic that can set in when things appear to be spiraling out of control and there is nothing we can do about it. Unplug from the media, saturate yourself in the Word of God and there you will find peace.
I pray this post helps you to manage the increase in costs because of inflation. Please leave a comment to let me know how this helps you!
Aisha Taylor is a single mom of twins, personal financial coach, work from home entrepreneur, and #1 Amazon Best Selling Author of the book “5+5 FNPhenomenal Ways to Save $100 This Week Without Killing Your Lifestyle.” Aisha has been featured in ESSENCE, Jet Magazine, and Black Enterprise. She is also the Founder of FNPhenomenal (Frugal –n- Phenomenal), a movement designed to help single moms create a vision for their lives, craft a financial strategy to support that vision, and show them that phenomenal living is possible. It’s time for you to be Financially Phenomenal!