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Americans are increasingly worried aboutinflationagain.
TheUniversity of MichiganIndex of Consumer Sentiment fell in January, and then plummeted nearly 10% in February.
The CPI reading ticked back up to an annual reading of 3%.
Core inflation ran even hotter, at 3.3%.
So much for the hopes that high inflation was behind us.
What does that mean formiddle-class Americans and their wallets?
Tighter Budgeting and Lifestyle
When inflation rises faster than your income, you lose purchasing power.
You effectively take a pay cut.
That means you gotta tighten up your budget and trim your lifestyle.
Were seeing food, healthcare, auto insurance and shelter costs leading the surge in CPI.
Look for places you could cut back without making dramatic cuts to your quality of life.
Which subscriptions can you cancel?
Thats the ugly reality of inflation.
It is unlikely the Federal Reserve will reduce interest rates if inflation remains above 3%.
Likewise, bond markets wont allow yields to fall while they smell high inflation risk.
Thats pushed the cost of homeownership out of reach for many first-time buyers.
So, many would-be sellers havent sold, leaving a low inventory of homes for sale.
That, too, has made it harder for first-time buyers to enter the housing market.
Expensive Cars
Inflation makes everything more expensive, and cars have been no exception.
But that might get even worse if the U.S. enacts tariffs on its largest trading partners.
Expect more expensive cars in your future, especially if tariffs become an economic reality.
Reassessing Your Retirement Portfolio
Recessions come and go, but inflation tends to stick around permanently.
Joseph Camberato, CEO atNational Business Capital, has seen this firsthand.
That means you may need more saved for retirement than you think.
Your living expenses in retirement will likely cost far more than you pay today, in nominal dollars.
So how should you invest for retirement, so your money grows faster than inflation?
Invest In Inflation-Resilient Assets
Some investments simply rise in value right alongside inflation.
Inflation doesnt necessarily mean lower profits or stock prices, said Parsons.
Other investments can also keep pace with or exceed inflation, he added.
Inflation-resistant investments like real estate, gold and Treasury Inflation-Protected Securities (TIPS) can further mitigate inflationary pressures.
Just watch out for bonds and cash held in low-interest accounts.
Inflation eats into the real returns of bond interest and the real value of your cash.
Find Ways To Earn More
Dont want to tighten your budget and lifestyle?
That could mean negotiating a raise at your current job or pushing for a promotion.
Alternatively, you could switch employers or upgrade your skills and find a new career entirely.
For that matter, you could also add a side hustle to earn some extra cash.
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