Reviews | Personal Finance Advice Won’t Really Help Americans Deal With Inflation

Bloomberg summed up the advice in this tweet:

The “No one said it would be fun” toggle line comes from the tweet, not the article itself. But no one wants to be told to eat their lentils and cut back on treatment for their sick pet, especially when the wealthy don’t need to do the same.

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

Catherine Rampell: Americans are unhappy with the economy. Many on the left don’t want to hear it.

Inflation, of course, is a huge problem. Prices continue to rise at the fastest annual rate in 40 years, according to February data, with the cost of gasoline, food and housing responsible for much of the increase. Food banks are reporting an increase in demand for help. Polls show that black and Latino people are more likely to say inflation is causing them financial stress than white survey respondents. Three in four Americans said in a Bankrate poll this month that rising prices were hurting their personal finances. Public anger is growing.

But inflation-related political and economic issues tend to be downplayed — even thrown out the window — when inflation is framed as a personal finance story. In this treatment, inflation becomes just another challenge that individuals have to face to improve their situation. Instead of making policy recommendations — steps, for example, the Biden administration could implement to ease supply chain shortages — a personal finance column paints the economic conundrum facing readers are confronted and the responsibility for the action returns to them.

Under normal circumstances, personal finance books and articles are popular. Most of us would like, for example, tips for investing in our 401(k) plans, instead of reading about how America’s retirement funding system actually leaves many of us at risk of going broke. money in old age.

But when it comes to inflation, this approach is useless. No one can cut their budget to get out of rapidly rising prices everywhere, not when wage gains don’t keep pace with inflation. Calls for sacrifice seem deaf because, however well intentioned they may be.

News Article: Inflation hits low-income Americans hardest

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 fees you pay but no longer use. (I recently did this and found two separate Disney Plus subscriptions.) And pet owners should think carefully, for ethical reasons, before giving an animal chemo.

But people know this stuff. Post reporter Abha Bhattarai this week showed how inflation affects people on fixed incomes. She spoke to pensioners who rationed hot showers and, yes, skimped on meat. “I do most of my food shopping from markdown bins,” one said. Another said many of her meals consisted of “oatmeal, eggs, pasta salad, grilled cheese sandwiches.” The problem was not ignorance of budgetary decisions. The problem is that they were reducing and still unable to meet rising energy and housing costs.

And if lease rents go up 33% — like in New York City, between January 2021 and January 2022 according to real estate site Apartment List — reducing meat consumption, even several days a week, isn’t likely to make a significant difference. The same goes for gasoline prices, which are rising at the fastest rate since record keeping began in the mid-1970s. People might be able to weed out optional readers; but their commuting to work and school is unlikely to change significantly, and taking public transportation to save money is highly inconvenient in most of the United States.

Giving people some helpful savings advice can’t “fix” inflation or make navigation much easier, nor was the problem solved when financial adviser Suze Orman suggested people stop “doing pee” their retirement savings on expensive take-out coffees. Or when then-Rep. Jason Chaffetz (R-Utah) told people to ditch their iPhones if they can’t afford Obamacare premiums, or when experts suggest millennials could afford homes if they only skipped the toast at the lawyer.

Inflation is not just a matter of personal finances. And treating it as such doesn’t change that fact.