In recent months, inflation has risen dramatically, which has created additional challenges for many Americans. Costs on daily essentials like food, toiletries, and other goods, have steadily gone up while the costs for larger financial commitments, including cars and homes, have also increased.
Inflation is clearly affecting everyone and our country’s economy, which is why most recently, the government approved the Inflation Reduction Act (IRA), a package made to reduce inflation while increasing taxes for large corporations to offset those costs. The fluctuations and the changes daily can make your monthly budget go awry while it can also be exceedingly difficult to understand.
We sat down with Amerant’s VP, Investment Portfolio Manager, Ricardo Melendez, and he provided us with insightful ways to combat inflation in your budget the best way possible.
Cash is King
To ensure your finances are in check, start spending less wherever you can. When you must spend, use cash, instead of credit. This is the best way to avoid the rising interest rates the federal reserve has implemented. Melendez explains “this is the best way for you to know and understand what you can and cannot afford. Also, when you pay for things with cash, you do not have the added interest costs on purchases. That’s why it’s important to ensure you are spending money on things you need first.
Only Use Credit When You Absolutely Have to
“The simple transaction of using a credit card can be considered a bad liability,” Melendez says, “it’s indicating that you’re buying something you don’t have the money for right now.” If you have the money, use your cash instead. This way, you can avoid carrying a balance on your card and paying the exceedingly high interest rates associated with it. “However, it’s ok to use credit, if you know you can pay your balance each month and have the discipline to do so regularly. Using your credit card can help boost your credit score, which is also important to keep high, especially during times of inflation,” added Melendez.
Why Fixed vs Variable Loans?
Taking on a loan debt during these times is also not ideal. However, as we all know, certain situations come up and we simply need a loan to fund it. “If it’s an absolute must, consumers should apply for personal loans or car loans with a fixed rate,” concluded Melendez. This is nice because you know exactly what you are signing up for the entire term of the loan. Once inflation eases you can always go back to refinance the loan and get a lower rate. A loan with a variable rate, on the other hand, can fluctuate often and at a moment’s notice, your rate is higher than you can afford, and this can throw your budget out of out of whack. A fixed rate allows you to understand just how high the rate is, and it will never change unexpectedly.”
If you are search for a loan that fits your current needs, apply at https://www.amerantbank.com/products/loans/ for a personalized experience with competitive fixed rates.