Inflation – the new, hidden tax – and how to address it
Inflation is hitting Americans hard this holiday season.
According to a report from BlackFriday.com cited by CNBC.com, 70% of American shoppers say they are taking inflation into consideration when shopping this holiday season. Another survey cited by CNBC from TransUnion says that 25% of consumers are planning on buying cheaper versions of desired gifts and/or more practical gifts – such as gas cards – this holiday season.
But inflation’s impact on holiday shopping is the least of it.
Americans are being hit hard with historic price hikes for food, gas and virtually everything else. For instance, recent consumer price index data from the Bureau of Labor Statistics shows that – from November 2021 to November 2022 – the price of gasoline has increased 10 percentage points and the price of dairy products (including milk) has increased by about 16%.
On Tuesday, the Bureau of Labor Statistics reported that inflation slowed to 7.1% in November. While this number is still excruciatingly high, it represents a five month decline since the four decade peak of 9.1% last June.
And while Republicans blame the current administration’s profligate spending for the increased interest rates – specifically the $1.9 trillion American Rescue Plan – and Democrats blame supply-side disruptions caused by the COVID-19 pandemic and the Russian oil embargo from the Russia-Ukraine war, one thing’s for certain, inflation is hurting Americans who are struggling financially and going deeper into debt to pay their bills.
So, aside from being a new, hidden tax, what is inflation exactly?
Inflation is an increase in the price of goods and services in an economy – such as food, or gas – caused when the government prints too much money. With too much money comes decreasing purchasing power and increasing prices.
And while there are no immediate or easy solutions for inflation, there are steps we can take to address it and the government’s monetary policy over time.
Below are several ways that you, personally, can help reduce inflation and consequently, improve our economy:
1. Stop spending money on items you don’t need
Focus on high priority items like food, gas, water, etc. A recent survey found that over 2/3 of Americans are living paycheck to paycheck. We must take ownership and control of our money and spending.
2. Set a budget and stick to it
Create a budget if you don’t already have one and reassess it every week, making adjustments as necessary.
3. Hire a financial coach
If you are struggling to manage your finances, hire a financial coach, they are well equipped to help you better manage your dollars and get out of debt.
4. Invest in the market and your retirement
Building a nest egg now will pay dividends in the future.
5. Get involved civically and politically
Your local town and state officials make decisions that increase the cost of your taxes and goods each year. It’s up to you to raise your voice and organize your neighbors to change these decisions.
6. Vote for state and federal elected officials who focus on improving the health of our economy
Vow to lower taxes and government spending. When new government programs are created, we ultimately end up paying for them through higher taxes, fees and inflation. Vote for people with sound economic policies to get our economy back on track.
It’s time we make a connection between the role of government and the health of our pocketbooks. If we want to address inflation once and for all, we will need to change our spending habits at home, and our voting patterns at the ballot box.