Taiwanese ethnicity man looking at the home budget and sorting out bills using his laptop in his cozy living room
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Americans are feeling the impact of surging inflation, which doesn’t appear to be easing up anytime soon.
For many, that means it’s a good time to revise the family budget.
The Consumer Price Index rose 7.5% on the year in January, according to a Thursday release by the U.S. Department of Labor. That notched the highest reading of the inflation gauge since February 1982.
Nearly all categories measured by the index increased month over month, and all were higher than a year ago. Energy costs, food prices and used cars and trucks posted some of the largest jumps.
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“It’s critically important to revisit your budget and how you want to go about spending your money,” said Greg Giardino, a certified financial planner and financial advisor at J.M. Franklin & Company in Tarrytown, New York. He added that overspending now could lead to bad habits in the future.
Here’s what financial experts recommend Americans keep top of mind as they rethink their budgets.
Rising prices mean that the budgets Americans have used for the last year and a half will likely no longer work, said Christopher Owens, CFP, a senior advisor associate at Wealthspire Advisors in Potomac, Maryland.
But, because inflation hits consumer prices differently, each person will have to look at their own spending to readjust their budget. For example, if you’re not planning to buy a used car or truck anytime soon, you’ll avoid prices that are up 40% on the year.
Still, you will likely be affected by other rising costs, such as higher prices of food at home and in restaurants and energy. Take a look at what you’ve been spending in those categories and reassign dollar amounts to them that make sense.
This is especially important for people who plan to travel in the future, Owens said, as budgeting for trips has become more complicated.
“It’s important to do that one extra step — how much is it going to be to go out to dinner?” he said.
As inflation continues to push prices up, Owens recommends consumers keep a close watch on spending in categories where costs are increasing for the …….