Current Inflation and Debt Consolidation
9/26/2022
2 minute read
Current Inflation and Debt Consolidation
You’ve likely noticed that the costs of items we purchase regularly — from milk to gasoline — have risen sharply this year. Time and government intervention can help reduce inflation from current highs; in the meanwhile, it helps to know more about it and how you can reduce its impact on your life and finances.
What is inflation?
Inflation is the rate that prices for goods and services has have increased during a span of time, usually yearly. Midway into 2022, U.S. inflation rates reached their highest level in four decades, largely due to increased production, material, and wage costs. Economic forecasts indicate inflation will last into next year as global markets and supply-chain issues persist.
What does high inflation mean for consumers?
To put it simply, inflation means your dollar won’t go as far as it has in the past, so your buying power is not as strong. Consequently, what you get for your money today is less than in previous years. Incomes have not kept up with inflation, and stimulus payouts have ceased. Consumers are starting to shore up savings, look for ways to cut back and be more strategic about spending habits.
The Federal Reserve is continuing to raise rates
If you have revolving debt like credit cards with variable interest rates, you may have experienced a recent rate increase. The Fed has raised the benchmark rate — to combat inflation and drive prices down — so it’s a bad time to be charging up your cards unless you can pay off the debt right away. Making minimum payments, combined with high interest, can mean years of budget-draining expense.
Debt consolidation can help
While some price hikes are finally starting to ease, it’s important to find ways to add breathing room to your household budget. If you’re making payments on debt, one way to free up extra cash is by using debt consolidation.
According to debt.org, the average variable rate on a new credit card has topped 20%, and carrying a balance of $10,000 at 21% APR could take nearly 15 years to pay off if you make minimum payments. Debt consolidation offers a faster solution that will cost you thousands less in interest. Consolidation could help you pay off high-rate debt balances faster and save money each month. Taking out a fixed-rate personal loan to do so also means having set payments that won’t be affected by interest rate increases.
Making ends meet during this time of high inflation means looking for cost-effective ways to manage your budget and your debt. If you’d like to learn more about a debt consolidation solution, the Lendmark Financial team can help you explore your options.
