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Worried about rising prices? Here's how to cope with inflation

Father working from home in residential kitchen with family in background
MoMo Productions/Getty Images

It's hard to pass a gas station or grocery store aisle lately and not take notice of how expensive everything seems to be. In fact, the U.S. inflation rate has almost quadrupled over the past two years. Households across America have been feeling the impact, and many are struggling to figure out how to cope with inflation.

In light of the massive increase in inflation and a looming recession, people are feeling a lot of pressure and financial anxiety. It's hard to feel any sense of optimism when most market analyses show the nation is heading toward difficult times. Feelings of fear and frustration are justified. However, as historical inflation trends suggest, there is reason to hold out hope for better days.

Here's a closer look at how inflation works and how to cope with it.

What is inflation?

Inflation represents a rise in prices that can lead to a decline in purchasing power. When prices increase, purchasing power can drop because consumers' money doesn't stretch as far. Usually, inflation is expressed as a percentage that indicates how much less a unit of currency can buy compared with previous time periods.

Too much inflation can harm an economy, but too little of it can also be damaging. Ideally, economists hope to see low to moderate inflation of about 2% each year. Even though it is relatively normal, dealing with inflation and its effects can be stressful. When navigating a rise in inflation, addressing consumers' financial anxiety is a great place to start.

Are you feeling financial anxiety?

Constantly feeling a sense of worry or concern about your finances can be a sign you have financial anxiety. It's a common misconception that you need to be experiencing money troubles to feel financially anxious. Anyone can experience financial anxiety, even if they have plenty of money to support themselves and their family.

It's easy to see how rising prices are leading to financial anxiety throughout the country lately. The 2022 Thrivent Consumer Financial Outlook Survey* found that 63% of those surveyed said inflation is pushing them off track financially. "We're seeing financial stress across the board right now," said Mary Jane Fortin, Executive Vice President & Chief Commercial Officer at Thrivent. "Due to inflation, many Americans don’t feel like they’re in a position to follow essential financial steps, like saving and
budgeting."

See if you have some of the symptoms associated with financial anxiety:

  • Difficulty making purchase decisions. Worrying about spending money can cause a lot of stress, and it's a major sign of financial anxiety if you constantly fret about what you can afford to spend. There's a difference between feeling temporarily anxious before making a substantial one-off purchase and consistently worrying about being able to pay your bills.

  • Spending more than you can afford to. On the flip side, you may overspend when you're feeling financially anxious to get the temporary feeling of relief, success or power that can come with spending money.

  • Hoarding your belongings. When combined, anxiety and overspending can lead to stockpiling the items that made you feel better after buying them, even if you don't need them.

  • Experiencing feelings of depression. Persistent sadness can stem from financial stress caused by inflation, a recession, job loss or other income-related event.

  • Struggling with obsessive behavior. If you feel an intrusively recurring urge to check your bank account or can't sleep because you're thinking about money, then you may be experiencing financial anxiety. When you realize you're having compulsive behaviors involving money, you may want to take note of how you're feeling and see if you can identify the potential triggers.
Due to inflation, many Americans don’t feel like they’re in a position to follow essential financial steps, like saving and budgeting. Having a financial strategy can give them the clarity they need when making important decisions about their money.
Mary Jane Fortin | Executive Vice President & Chief Commercial Officer, Thrivent

How to cope with inflation-induced financial anxiety

Periods of financial anxiety are natural and impossible to avoid completely, especially when inflation is at the root. But you can take steps to cope with financial anxiety. These strategies may help you manage your financial stress:

  • Focus on what you can control. You can't single-handedly change inflation rates or the prices of goods, but it can be helpful to sort out your emotions. To alleviate your stress or feelings of powerlessness, identify what you can control and focus on those adjustments—consider reviewing how you spend your money, making a plan for paying down debt, seeking out a higher-paying job or taking on a side hustle as ways of increasing your income.

  • Get back to basics and make a new budget. If you're feeling like you can't keep up with the costs of inflation, you could create a fresh monthly budget from scratch that accounts for the more expensive prices you are encountering. That way, you know exactly where your money will be best allocated each month. Pay close attention to where all your income is coming from and where you have been spending it. Write down your fixed expenses (such as living and transportation costs), then account for your varying necessities (like gas or groceries), and then add in some savings goals. And remember, the most important part of a budget is sticking to it. The Thrivent Survey found that while 82% said that a budget is effective, only 53% currently follow one.

  • Create financial goals for yourself. Set short- and long-term plans for your debt and investments (such as saving for retirement).Then chip away at them to give yourself a boost of financial confidence and make the future seem less scary.

  • Establish emergency savings. When revising your budget, make room for an emergency savings fund. Knowing you have savings ready for when you have unexpected expenses or lose a source of income can make it easier to overcome feelings of financial anxiety. You'll know you have a cushion to fall on. It's easy to see why the Thrivent survey found that 31% of Americans have a goal of increasing their emergency savings.

  • Review your credit score and reports. Knowing where you stand credit-wise may give you some relief knowing that you have a strong score, or it can help you realize you need to get your credit score in a better place.

  • Manage debt. Try to keep making progress on paying down debt wisely. You'll spend less on interest payments and may free up room in your budget to work toward other financial goals. It's beneficial to create a plan for making consistent on-time payments for all your sources of debt to help keep your credit score healthy.

  • Ride the wave when it comes to investments. If you are investing your extra cash, it can be helpful to "ride the wave" during times of economic difficulty. Investing when the market is down may result in a profit if you can hold onto your investments until market conditions improve. You may need to rebalance at times, but maintaining investments even during periods of high inflation can lead to growth.

  • Find a support system. You don't have to face the challenges of drastic inflation increases on your own. If you're struggling with debt, you can reach out to your creditors or lenders to learn what hardship options are available for making repayment more manageable. A mental health professional can work through coping with your financial anxiety. And when it comes to navigating your money, you can talk with a financial advisor and create realistic goals and plans, whether it's having enough money during retirement, saving to buy a home or something else. Asking for help can be intimidating, but it can also make a world of difference.

Remember that times of high inflation are likely temporary

As stress-inducing as rising prices and lower purchasing power are, it can be helpful to remember that periods of inflation are often cyclical. Costs may soar, but they will likely go down again as they historically have.

In fact, the U.S. faced inflation woes not long ago, in the late 1970s. Inflation rates hiked up and reached 12.5% in 1980 (when a recession began) and then gradually declined until reaching a more typical 1.1% in 1986. For comparison, inflation is expected to settle at 9.1% in 2022.

As noted, inflation can be a sign of good economic progress. In the growth state of an economic cycle, it's normal for demand to surpass supply. Businesses then raise their prices, which makes the rate of inflation increase. Moderate inflation can be a good thing, but high inflation can signal trouble. Because this is all part of the economic cycle, it's important to note that this current period of high inflation is likely to end one day.

If planning for the future is making you feel financially anxious, you can meet with a local Thrivent financial advisor, who can help explain how to cope with inflation and make sure your retirement savings can withstand the current rate.

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*Methodology: This general population research was conducted in partnership with data intelligence company Morning Consult and polled 2,221 adults across the country between May 9 and 17, 2022. The interviews were conducted online, and the data were weighted to approximate a target sample of nationally representative adults based on age, gender, ethnicity, income, geography. Results from the full survey have a margin of error of +/- 2 percentage points.
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