Just as this cartoon portrays, I was able to save money during the pandemic. My husband was fortunate to keep his job (although they lowered his pay for a short period), and we didn’t do anything for almost 12 months. No travel, no eating out, no clothes shopping, no ‘extra’ shopping in general. Instead, we were able to pay down a significant portion of our mortgage.
In 2021, we spent money. Our bills remained the same (i.e. insurance, utilities, etc.), but we did some home improvements, traveled, and went out to eat. We took advantage of exceptionally low interest rates and refinanced our mortgage one last time (2.25%). It lowered our mortgage payment by $1,000 a month. We were in a great situation.
Fast forward to 2022. All of our regular bills (except the mortgage) have increased by between 20 and 50%. The economic pundits have you believing it’s only 7%. That is simply not true. Every company has jumped on the ‘inflation’ bandwagon and raised prices an astronomical amount. 7% would almost have been okay. But it is just not so. We have personally been experiencing numbers much higher than 7%.
Here are a few examples: Subscription services were raised by $1 a month. On $7.99, that is a 12.52% increase. A recent gas utility bill went from $192 (2021) – to $272 (2022) which is 41.67%. (I highly doubt this past January was that much colder than last January.) I just received a notice that our property tax is going up to more than $9,000, which is a 20% increase. Our sewer line insurance and water line insurance increased by 56.18%. I have yet to get our new car and homeowner’s insurance policies, but based on this article, I should expect a significant increase.
My husband’s pay raise for 2021 was 0%. Houston, we have a problem.
Even with these increases, we are fortunate. We make enough income to cover our increasing bills, but we have less disposable income. If we were in retirement, on a fixed income, this would be frightening. A 40-50% increase on the essentials such as utilities and insurance is insane and non-sustainable. What can we do?
We can only control our own situation, and we are taking action to do so.
We are going to continue with our plan to retire in 1 year, however, we are tweaking our plan slightly. (The bullets in bold are new!)
- Saving as much cash as we can (the no/low buy year!).
- Selling our home and buying a smaller home. (Lower taxes, insurance, utilities)
- Selling one of our cars. (Lower insurance/maintenance/gas).
- Moving to a state with no income tax and more sun!
- Utilize retirement savings to purchase real estate for rental income.
- Establishing part time work for another source of income and mental stimulation.
I have yet to discuss the last two bullet points with my husband, but I’m sure he’ll be receptive to it. 😉
I believe diversification is going to be key in retirement and getting income from different sources may be the ideal solution to this crazy economic climate we are in.
How are you handling this wild inflation? What are you doing to take control?