“Inflation impacts families on a fixed budget,” says Claudia Keller, CEO of Second Harvest Food Bank of Orange County, California. “For a family, the most fungible part of your budget, the part you can cut back on, is food.”
From the hurricane-damaged landscape in Louisiana to the serene coastal beaches of Orange County, California, the most rapid inflation in almost 40 years is causing consumer goods from coast-to-coast, especially food, to skyrocket. In fact, more Americans are turning to their local community food banks for basic sustenance. As those hunger-relief organizations gain even longer lines for food, in turn, those same nonprofits are feeling the burn of paying more for food to supplement donations.
Solving for what’s causing these inflationary conditions isn’t a simple, one-off explanation. One cause is certainly the cost of energy, which had already started to rise in the weeks prior to the war in Ukraine. Wendy Edelberg, director of the Hamilton Project at the Brookings Institution, also noted core goods’ impact on inflation. Approximately two-thirds of the rise in inflation in the last six months can be attributed to goods, the result of a massive deluge in consumer demand and sluggish supply – both pandemic-related factors.
Families are bearing the brunt of the financial health fall-out
Families confined by ever-growing housing and gasoline costs have a good measure less, if anything, to spend at the grocery store, where prices on goods are running consumers 6.3 percent higher than they were more than a year earlier in January 2021.
Mendy Hughes of Malvern, Arkansas, used $4 from her ever-thinning finances to pick up an affordable dinner from McDonald’s for her three children on her day off from Walmart. Following over a decade with the company, Mendy makes $12.85 an hour, full-time, leaving about $200 after she’s taken care of her and her three kids’ monthly necessities. The rising costs are a nightmare for both her and her budget.
“Food – it’s stressful,” she says in the article by CBS News. “I think all day: ‘What am I going to buy when I get off [work] that I can afford? What am I going to get?’ It’s just hard. It’s worse now because things have gone up so much. I can’t even afford to buy a cart of groceries.”
Inflation lessens the purchasing power of everyone in the country, but it hits the lower and middle classes the hardest when they have to spend a greater portion of their income on food and other essentials. Inflationary price hikes on low-cost goods sold by some of the biggest wholesalers and retailers in the country are “disproportionately hurting lower income Americans,” says Jackie Benson, an economist working on behalf of Republicans on the Joint Economic Committee in a late 2021 economic analysis.
Washington, D.C.’s Capital Area Food Bank states they can’t calculate how much the rising demand stems can be attributed to inflation, but a spokesperson claimed it’s in part “because we continue to see such an increase in demand overall due to the pandemic’s economic impacts. We are, however, seeing more demand for specific items from our nonprofit partners (who we supply with food), namely animal protein — chicken, beef, etc. — because it’s become so much more expensive.”
5 steps for improving your members’ financial stability during inflation
As mentioned earlier, in October 2021 the Consumer Price Index measured the annual rate of inflation in the United States at 6.2 percent, the highest it’s been since 1981. Even if many of your members received a pay increase this year or got a higher paying job, their take-home pay may not stretch as far because the dollar isn’t stretching quite as far, either.
Here are steps your members can follow to help them weather, and maybe even grow, this financially-stressful time:
Critique spending
Tracking budgets is one of the primary methods members can regularly employ to battle the effects of inflation. Regularly scrutinizing a budget ensures they will be viewing what they spend, purchasing only what they make in income, preferably less, regardless of how inflation affects costs. Members must make sure to budget for goods that inflation may have a significant impact on like gas, housing, clothes, and especially food. Also, they need to make sure to designate their money at the first part of the month and stick to the spending plan they have set up.
Members can be flexible with spending amounts, but the most important thing they cannot do is indulge in their retirement savings or emergency funds. This budget enables them to determine their spending priorities and help them streamline which items to spend money on and which ones to cut out of their budget.
Discontinue recurring expenses
Recurring expenses can definitely add up, especially if a member is lower-income and inconsistent with their financial health habits. That’s why it’s always important for your members to critique the products and services they’re signed up for. When they don’t take a hard look at what may appear to be small, recurring monthly purchases that they may be able to afford on their own, they can quickly snowball into a weighty total once they’re all added together.
If they don’t recall everything they signed up for, counsel them to go through their debit or credit card statements and look for any subscriptions they may be paying every month. According to AAA, gas prices have tripled in the last year and a half. Are those gas bills catching up with members on their commute due to the inflation spike? They can save on gas by taking public transportation two or three times a week. If a coworker lives nearby, try carpooling. Reducing expenses not only saves the member money, but offers them the opportunity to practice minimalism; owning less but focusing more on the things that matter most.
Gain financial stability with digital life event lending
This brutal rise in inflation rates the last 18 months comes off two years of financial devastation due to the coronavirus pandemic that destroyed millions of consumers’ financial health. The effects of stimulus checks, while temporarily effective, are long in the past while the Paycheck Protection Program expired almost a year ago. Many struggling consumers are still searching for a source of consistent financial stability and economic health they can access easily when finances get tight.
Add in the fact that in 2021 39 percent of Americans could not afford a $1,000 emergency expense. It remains clear that responsible and affordable life event loans remain a crucial credit union lifeline. Today’s consumer-centric society not only requires but demands timely, efficient, and more innovative products and services whenever, wherever that consumer may be. That’s why mobile life event lending represents the perfect resource for the way credit unions can gain the trust and confidence of their membership.
The QCash life event loan program provides the funds your members need, day or night. Our proprietary relational-decisioning engine allows the platform to consider a more well-rounded, 360-degree evaluation of the loan applicant, taking into consideration factors a traditional FICO simply cannot. If approved, it takes only six clicks in 60 seconds for the requested funds to be deposited directly in the applicant’s account. No credit check, and nothing more than a computer or smartphone to complete the super-simple process.
Look out for less-costly alternatives
A group of Consumer Report taste testers discovered that most store brands actually equal the name brands in overall taste and quality while pricing at 15-30 percent less. Just imagine how much money in your member’s budget they could save if they considered the generic brands rather than the overpriced products that count on their name more than quality. What if – and it’s a difficult one, we know – members could cut back on going out to restaurants or ordering takeout? We all know that $10-$20 lunch 3-5 times a week not only burns a hole in one’s wallet or purse; it can figuratively burn down your member’s entire financial life, especially if, like Mendy above, you’re barely scraping by as it is.
Keeping an eye on debt
Credit is a formidable resource that offers the potential to purchase many of life’s comforts and material possessions. Debt, however, also offers serious challenges for one’s financial health if members’ budgets get stretched too far and they begin paying only the minimum balance. Excessive debt signals a red alarm, and finding an avenue to pay off that much debt can send one down a dark and anxiety-riddled road of financial stress and instability.
QCash’s mobile life event loans can offer a convenient, affordable, and immediate first step in getting your members’ heads above water and then working directly with you to build a financial health plan that can get them back on the road to financial wellness and success.
