Have you noticed that just about everything in life seems to be more expensive these days? You’re really not imagining things.
Inflation levels recently reached a 13-year high, and unfortunately, it doesn’t look like things are going to cool off anytime soon. In fact, according to a Duke University survey released this week, we should expect higher-than-average cost increases to stay with us for a good eight to 10 months. Ouch.
If you’re already feeling the impact of inflation, try to take some steps to ensure you don’t end up deep in debt. Here are a few key moves to make.
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1. Get on a tight budget
If you’ve never followed a budget before, now’s the time to change your tune. When living costs rise, it’s more important than ever to have a clear picture of what your bills look like.
Comb through your bank account and credit card statements from the past year to see what your various bills look like and what they cost on average. Then, adjust those totals to account for recent inflation and compare that total to what your paychecks give you.
For example, say you look at your bills and see that you normally spend $20 a week — or $80 a month — on gas. If, for the past four weeks in a row, you’ve spent $23 a week on gas instead, it means you’ll need to adjust that figure upward to $92.
Then, you may need to go into a different spending category and reduce it by $12 to compensate if you’re already maxing out your paychecks. That could mean downgrading your cable plan or dumping a streaming service for the time being.
2. Be a savvy shopper
Groceries now cost more across the board, but that doesn’t mean there aren’t any ways to save money at the grocery store. Spend a little time each week seeing which supermarkets have staple items on sale, and when it makes sense, buy items you use frequently in bulk to snag a discount.
3. Apply for a better credit card
There are many credit cards out there that reward you for everyday purchases like gas and groceries. If you’re not getting much cash back from your current cards and you have a strong credit score, apply for a new one with a more generous rewards program.
4. Get a side job
You may only be able to stretch your current paycheck so far and cut back on so many expenses. If that’s the case, consider picking up a side hustle on top of your main job.
The good news is that many businesses are desperate for workers right now, so you may have plenty of local opportunities where you live. And if not, you can carve out your own gig, whether it’s signing up to walk dogs, babysit, or drive for a ridesharing service.
Hang in there
The reason inflation is so bad right now is that a lot of supply chains were shut down during the pandemic and are only starting to open back up. At the same time, an improving economy means there’s more consumer demand for products. Whenever you have a situation where demand exceeds supply, it sets the stage for higher prices.
In time, supply should catch up with demand, and inflation levels should start to calm down. But until that happens, it’s important to do whatever you can to protect yourself financially.
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Ask Gareth Shaw: ‘I’m scared I’ll get rejected for credit card because of mistakes I made in the past’
Answer: Well done to you for getting back on your financial feet. Climbing your way out of debt is a marathon – it takes sacrifices and planning, so you’ve taken some really important steps in your financial journey.
The good news is that the negative information – the records of missed payments, defaults and even county court judgments – won’t stay on your credit report forever. Details of your late payments can be viewed for six years after they were settled. Searches and rejections of credit typically disappear after 12 months. So this dark cloud won’t hang over you forever.
Before we talk about applying for credit again, there are steps you can take to improve your credit health. Firstly, you should review your credit reports and make sure there are no errors that could be holding your score back. You can get your credit report for free from each of the three credit reference agencies – TransUnion, Equifax and Experian – and can ask them to investigate errors. Lenders and credit reference agencies have 28 days to respond to disputes.
Registering to vote by getting on the electoral roll can boost your credit score, while you may even be able to add the record of your monthly rent payments to your credit score by asking your landlord to report rental payments to firms like The Rental Exchange, CreditLadder or Canopy.
Experian has launched a new tool that allows you to share information about your banking habits and subscriptions – information which is not traditionally factored into your credit score – in order to increase your score. That means paying your council tax or even paying for Netflix and Amazon Prime could give your score a boost.
If you still want a credit card, your choice is likely to be limited to a particular set of cards designed for people with poor or ‘thin’ credit histories. These are known as ‘credit-builder’ cards, or sometimes ‘bad credit’ cards.
These cards have higher interest rates compared to the most competitive products in the market, to reflect the risk that a lender is taking in by providing credit to someone with a history of repayment problems. You can expect to find an APR of around 29 per cent. They also have lower limits, so when you apply, don’t be surprised to find that the lender will initially only give you £250 to £500.
However, these cards can be used to demonstrate that you are a responsible borrower, can repay on time and stay within your credit limit.
Here’s the golden rule – avoid borrowing money on these credit cards. Purchases tend to be interest-free for 55 days, after which you’ll be charged a considerable amount of interest. So limit the use of these cards, and when you do use them, try to pay them off in full. If you don’t pay on time, you will lose any promotional offer, be hit with a fee and your provider will report your missed payment to the credit reference agencies, reversing any good work you might have done. Set up a direct debit to ensure that your minimum payments are met in advance of the credit card payment date.
When you apply, use an eligibility checker first. This will ask for some basic information and carry out a ‘soft search’ on your credit file, returning a list of cards and the probability of your application being successful. That would be a helpful guide to find a card that is likely to accept you.
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