Managing Your Finances and Debt During an Economic Downturn | CCCS of Rochester
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Managing Your Finances and Debt During an Economic Downturn

The U.S. is experiencing economical pains that make budgeting and financial management more important than ever. But even a good budget might not be enough to keep from going deeper in debt as inflation soars and gas prices reach new highs.

According to the American Automobile Association, gas prices reached a new high in early March when they hit a national average of $4.33. Meanwhile, the national median rent soared to a record high of $1,792 in February, according to CBS News. Prices of used vehicles are up more than 41% in 12 months while food is up almost 8%, according to Forbes. Not to mention that inflation is at its highest rate since 1981, according to the National Foundation for Credit Counseling

Needless to say—tough times are here, and many people are struggling just to stay afloat. 

To help you manage your finances during these unpredictable times as continued supply chain and economic issues make their impact on Americans’ wallets, here are some tips to get you through:

Be thrifty with your tax returns. It can be tempting to take your tax return and run to Amazon or plot out an expensive kitchen renovation. But the truth is, high inflation rates are expected to be here for a while, among the other issues currently impacting the U.S. economy. Instead, use your tax return to pay down debt or put away in savings.

Plan ahead. With food prices so high, your grocery bill can certainly be a source of financial pain. Before you go shopping, make a list of the items you need. This will help prevent overspending on unnecessary goods. Also, by planning and consolidating trips, you can soften the impact of the gas pump.

Save. If you didn’t have a budget before, now is the time to make one. And don’t forget to designate a portion of your monthly income to savings if possible. The rule of thumb is 20%. Of course, if that’s too much, strive to put away as much as you can, while making sure to pay your bills on time. If you have a savings account already in place, try to hold off on using it until it's necessary, and then plan on how you’ll replenish your savings once you’re more financially stable. 

Limit spending. This may seem easier said than done, but by budgeting and eliminating extraneous expenses, you can better manage your finances. This might be the time to cancel a streaming service you don’t really need, buckle down on eating out, and forgo costly entertainment. Try to find recreation you can do outside or on the cheap while you limit spending.

Talk to a credit counselor. If you’re already in debt and it’s only getting worse, make an appointment with a credit counselor. During your appointment, a counselor will help you create a manageable budget and offer additional resources. The counselor may recommend you get on a debt management plan, where a counselor will work with your lenders to reduce your interest rates and consolidate your loans into one affordable monthly payment so that you can pay off your debt in three to five years. 

Through careful money management and knowing when to ask for help, you’ll be better able to manage your life and survive these turbulent financial waters.