From gas to groceries, American households are seeing rising prices as the US economy attempts to recover from last year’s pandemic lockdown. In the last months, American consumers have seen a 13-year high in prices with little indication when things might get better.
Before the start of the pandemic, studies showed that Black Americans were financially vulnerable and still recovering from the 2008 financial crisis. Pair that with higher unemployment rates and increased risk of experiencing homelessness, and the economic toll on our communities is dire.
So what does higher inflation rates mean for individual Black American households? The Black Information Network spoke with financial advisor Jordan Awoye to learn more of the economic situation at hand.
What is Inflation?
To better understand the impact of the economy, we thought it best to break down some of the terms we keep hearing.
“Rising inflation is when the purchasing value of your dollar declines. Or in other words, goods such as groceries increase and services [go] up,” Awoye told BIN. “So, for example, goods such as groceries increase and as a result you’re able to buy less groceries/food for your family with the same amount of money.”
Inflation typically occurs when production costs go up, especially during a surge in demand. Last month, the US saw a 5.4% jump in prices –– the highest increase since August 2008. Some economists predict that the increased prices are going to be around for a while.
What’s Going to Happen to Our Wallets?
With increased prices on goods, Awoye warns our wallets are more than likely going to feel the impact, if they haven’t already.
“People will see that reflected in how far their money goes as opposed to before,” he said, illustrating the point that a $50 tank of gas might have given a driver 17-18 gallons before inflation rose, but that same $50 might only give you 12-13 gallons now.
In general, with inflation on the rise, purchasing power decreases, so your money may not stretch as far as it might have before.
What can Black households do to Combat the Impact of Rising Prices?
“People should look for small ways to save money and cut corners as much as they can with coupons or maybe shutting off irrelevant services,” Awoye suggested. “Take a look at cash flow –– how much money do you have coming in and going out?”
“Next, start to better manage miscellaneous spending and your budget,” he added, suggesting that half of any money leftover should go towards saving or investing. “Continue to repeat this process,” he said, suggesting Investopedia as a financial resource individuals can tap into to learn more about investing, budgeting, and more.