June 10, 2023
Opinion | Personal finance tips won’t help Americans truly cope with inflation – The Washington Post

Opinion | Personal finance tips won’t help Americans truly cope with inflation – The Washington Post

Bloomberg summed up tips in this tweet:

The flip line “Nobody said this would be fun” comes from the tweet, not the article itself. But no one wants to be told to eat their lentils and curtail treatment for their sick pet, especially when the wealthy don’t need to do the same.

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The big way the piece missed the boat was in assuming that these lifestyle cutbacks could result in significant savings and confer a benefit of teaching self-control control and increasing personal resilience.

Inflation, of course, is a huge issue. Prices continue to rise at the fastest annual pace in 40 years, February data showed, with the cost of gasoline, food and shelter responsible for much of the increase. Food banks report increased demand for help. Polls show that Black and Latino Americans are more likely to say inflation is causing them financial stress than White survey respondents. Three out of four Americans said in a Bankrate poll this month that rising prices are hurting their personal finances. Public anger is growing.

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But the political and economic issues tied up in inflation tend to be minimized — if not tossed out the window — when inflation is framed as a personal-finance story. In this treatment, inflation becomes just another challenge for individuals must face to improve their situation. Instead of making policy recommendations — steps, say, the Biden administration might implement to ease supply-chain shortages — a personal finance column describes the economic conundrum that readers face and throws responsibility for action back on them.

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But when it comes to inflation, this approach is useless. No one can budget-cut their way out of fast-rising prices across the board, not when wage gains aren’t keeping pace with inflation. Calls for sacrifice sound tone-deaf because, no matter how well-meaning, they are.

Much of what the Bloomberg column argues is true. Vegetarian meals are often cheaper and healthier than meat. It’s a good idea to review your credit card statements for monthly subscription charges you’re paying for but no longer using. (I recently did this and found two separate Disney Plus subscriptions.) And pet owners should think hard, for ethical reasons, before putting a pet through chemo.

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But people know this stuff. Post reporter Abha Bhattarai showed this week how inflation is affecting those on fixed incomes. She spoke to retirees who were rationing hot showers and, yes, skimping on meat. “I do most of my food shopping in markdown bins,” one said. Another said many of her meals consist of “oatmeal, eggs, pasta salad, toasted cheese sandwiches.” The issue wasn’t ignorance about budgetary decisions. The problem is that they were cutting back and still were unable to keep up with the rising costs of energy and housing.

And if the rent on leases is rising by 33 percent — as it did in New York City, between January of 2021 and January 2022 according to the real estate site Apartment List — cutting back on meat, even several days a week, is unlikely to make a significant difference. The same is true with gas prices, which are increasing at the fastest rate since record-keeping began in the mid-1970s. People might be able to eliminate optional drives; but their work and school commutes are unlikely to significantly change, and taking public transit to save money is highly impractical in much of the United States.

Giving people a few helpful savings tips can’t “solve” inflation or make it significantly easier to navigate, any more than the problem was solved when financial adviser Suze Orman suggested people stop “peeing” away their retirement savings on expensive takeout coffees. Or when then-Rep. Jason Chaffetz (R-Utah) told people to give up their iPhones if they couldn’t afford Obamacare premiums, or when pundits suggest millennials could afford homes if only they would skip avocado toast.

Inflation is not a simple personal finance story. And treating it like one doesn’t change that fact.

Source: https://www.washingtonpost.com/opinions/2022/03/24/personal-finance-tips-wrong-approach-for-coping-with-inflation/

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