Elizabeth Gorham, South Dakota State University Extension Family Resource Management Specialist
Debra Pankow, North Dakota State University Family Economics Specialist
Barbara O’Neill, Rutgers Cooperative Extension Specialist in Financial Resource Management
The increase of prices of goods and services, such as gasoline, food, and health care, can be traumatic, especially if you are retired and/or living on a fixed income. No matter what your present circumstances, it can be alarming to realize that your income does not go as far as it used to in covering the basics.
Increases in prices are often due to an increase in the price of one essential product that triggers an increase in the price of other products and services. An example is an increase in price of a barrel of oil on the global market that results in an increase in the price of gas at the pump which, in turn, increases transportation and heating and cooling costs. It doesn’t take long until you personally feel the effects of price increases to the extent that you have little or no discretionary funds and/or you strain to pay all your bills.
When prices rise, don’t panic, but don’t become complacent either. You need to adjust your spending and develop a spending plan (budget) to pay bills. Financial affairs are still within your control. It will take work and planning, but you can survive a financial crisis and come out stronger when it’s over. Don’t stop credit payments or ignore the fact that you are facing financial difficulties. Make an action plan as soon as possible.
Jot down how you spend your income. If you do not already have a good idea of your spending habits, track your household expenses for a month or two. This will give you a good idea of where you will be able to make changes in future spending. Family living expenses can be separated into fixed and variable (or flexible) expenditures. Fixed expenses include regular payments such as rent, mortgage, and car loan payments, other types of installment credit, health and life insurance payments, and equal payment plans for utilities. Flexible expenses include recreation, leisure, food, clothing, personal care, and so on. It is these flexible expenses, especially, that a family can examine and then make choices on ways to cut spending when times are tough.
Household expenses are the key to how well you do when dollars are scarce. If your family does not follow a spending plan (budget), now is the time to start. Family input is essential, as is being realistic and flexible. Be creative about spending cuts. Remember, you still want to survive comfortably. Below are some suggestions:
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