Finance

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

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.

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 Blacks and Latin Americans are more likely to say inflation is causing them financial stress than white survey respondents. Three out of four Americans said in a The bank rate survey this month that rising prices are 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.

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.

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 always unable to meet rising energy and housing costs.

What if lease rent increases by 33% – like in New York, between January 2021 and January 2022 according to the real estate site List of apartments — reducing meat consumption, even several days a week, should not make a significant difference. The same is true for gasoline prices, which are rising at the fastest pace since the beginning of record keeping in the mid-1970s. People might be able to eliminate optional drives; 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-Representative Jason Chaffetz (R-Utah) told people to ditch their iPhones if they can’t afford Obamacare bonuses, or when experts suggest millennials could afford homes if they only skipped the toast at the ‘attorney.

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