Financial advisors offer tips to outsmart inflation as prices spike

They say finding the discipline to start taking baby steps is key
YE Changing Economy
Posted at 8:30 AM, Jan 20, 2022
and last updated 2022-01-20 08:30:57-05

TAMPA, Fla. — Slowly but surely, prices are going up.

In fact, prices paid by U.S. consumers jumped 7% in December from a year earlier, the highest inflation rate since 1982.

Bob Doyle and James Wilkerson, both financial advisors in the Tampa Bay area, say it’s a reality consumers should acknowledge and accept.

“It’s really just the loss of your purchasing power. That dollar that got you some goods back in that day is not getting the same amount of goods today,” said Wilkerson, a financial planner with WealthWave in Tampa.

“That’s why they call inflation the silent killer,” added Doyle, the President & Chief Investment Officer of Doyle Wealth Management in St. Petersburg. “It’s very slow, and it can slowly, quietly erode your capital — your take-home pay.”

Both Doyle and Wilkerson say there are ways to beat inflation, but the “b-word” isn’t one they’d recommend: budgeting.

“A budget sounds so restrictive,” said Wilkerson.

“It’s kind of like with a New Year’s Eve or New Year’s Day diet. They start off well, but nobody finishes them,” added Doyle.

Instead, the two recommend taking less formal steps.

“Look at your bank statements,” said Doyle. “How much money went out of your bank statement this month, the month before, and the month before? Where did it go? That’s what you want to analyze. Where did it go? Rent? My mortgage? Great. How much went onto credit cards? Did they go up? Did they go down? And what am I putting on my credit cards? That’s what you want to analyze, and if you can improve that, that’s a great first step.”

“You’ve got to learn to live on 70% of what you earn. Unfortunately, most people have a champagne taste but really have a Coca-Cola budget to supplement it,” added Wilkerson. “You sit down, identify everywhere that you’re spending dollars, okay. Understand how much you have coming in and how much is going to be going out.”

Apps like Mint and Truebill can help you visualize your spending habits. Doyle and Wilkerson say it’s also wise to look for subscription services you’re paying for but may have forgotten about and other ways to cut back.

“Look at where you’re spending your money and see if there’s anywhere that you can, perhaps, reduce that spend — reduce that outflow. Is it the hot coffee that you get on your way into the office? Is it that three nights a week of eating out to dinner?” Doyle said.

They say, by finding ways to save money, you can then invest those savings into retirement accounts, like a 401(k) or Roth IRA, or use them to pay off credit card debt.

“Many of us today, we say, ‘I’m going to save what I don’t spend at the end of every month, so what I have leftover, I’m going to save.’ Warren Buffett has always said, ‘Look at it in the opposite direction,’” Doyle explained. “‘I’m going to save this much every month. What I don’t save, I’ll spend.’ If you do that, you will be miles ahead of everybody else, and your long-term financial goals will be realized. But it takes discipline.”

Ultimately, Wilkerson says becoming more financially literate is important, as is seeking the help of a professional when it’s appropriate.

Both say even “baby steps” can make a difference in the long run.

“Don’t despise a small beginning. Get in where you’re comfortable. It doesn't make that much of an impact on what you’re putting away. But think about it. $10 a day — most people go through that at lunch anyway,” said Wilkerson. “The difference between ordinary and extraordinary is a little extra.”