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Here’s how experts say you can rework your budget for high prices, debt and investments

Greg Young is meticulous about his budget. He has the same Excel file that has tracked his finances for over 10 years.

He’s been keeping tabs on his groceries since 2010, so he’s very aware of the rising cost of groceries, gas, and just about everything else. He estimates that his weekly Meijer receipt has gone up by nearly $20.

Young spends his time saving his money.

He checks out Sunday coupons and meal preps around what’s on sale. He calculated how many cents saved on Costco gas will pay for his long-term membership. And as a new homeowner, he’s researching the best quotes for renovations and researching DIY project options.

After a series of errands on Sunday, Young proudly brings home her receipts, adding up the savings.

“I like saving money because it means it’s always in my wallet,” he said.

Keeping a close eye on his weekly inflows and outflows has helped Young stay on top of his finances, but inflation has caused many Michigan residents to reevaluate their disposable income.

Asking basic numbers about income and expenses is where financial advisor Jeff Arevalo starts when he takes on a client at GreenPath Financial Wellness.

“If people don’t know where to start, that’s okay,” he said. “It’s honestly a very common state of mind, a very common kind of emotion to have.”

Not everyone needs a decades-old expense diary like Young, but ultimately a lot of the same principles apply, Arevalo said.

For those new to budgeting or reworking a budget to accommodate inflation, Arevalo encourages them to use the resources available to them, such as checking credit scores and using budgeting mobile apps.

For those who want more financial analysis and goal setting, he recommends a financial advisor. GreenPath, a national nonprofit headquartered in Farmington Hills, offers free budget advice, including debt management.

“Asking for help doesn’t mean you’re a bad person or doing something wrong,” Arevalo said. “Sometimes you need that revival, to push something different, to get a different perspective.”

Related: Pandemic aid has supported millions of Michiganders for two years. What’s left?

Consumer confidence has been shaken, especially for those who felt like they were relying on pandemic aid to stay afloat, Arevalo said. He fears the adjusted cash flow will make people turn to credit cards.

“Because people don’t have those kind of safety nets to fall back on, they’re under that daily budget,” he said. “These credit cards, sometimes those, have been the lifelines. Maybe they didn’t have to use them as much, but now we see it starting to increase again.

During the pandemic, the savings account reached record highs. In two years, US households have accumulated $2.5 trillion in excess savings, according to a Brookings Institute Report analyze household finances.

Overall household debt declined in 2020, with one of the most striking areas being credit card debt. In 2020 and 2021, credit card balances have declined. Brookings’ analysis indicates that stimulus checks are being used to pay down debt during this time. In addition, a sharp decrease in overall spending during the shutdown.

Related: Student loan repayments have been frozen for two years. Here’s how the break helped 6 Michiganders.

The pause on student loans is also a contributing factor, as borrowers could use those dollars to pay off debt in other areas.

Another extension has been granted to student loan repayments, freezing interest and collections until August 31. The question of using this extension to pay off debt or to invest has been a popular one among clients of Kristen Fillmore in East Lansing.

Fillmore, principal at Plante Moran Financial Advisors, said the first consideration comes down to basic math. It compares the interest rate on the debt to the expected return on investment. If the interest rate is going to accumulate beyond the profit, she advises paying off the debt first.

But, she notes, the stress of living with debt shouldn’t be ignored.

“If they have this debt hanging over their heads and they just want to get rid of it and make their lives easier, that’s definitely a valid factor to consider,” she said. “While the qualitative side may be a little less solid, it can trump the kind of quantitative numbers.”

For consumers worried about the evolution of their 401ks and other long-term savings plans, senior financial adviser Anastasia Wiese said the best advice is to stay the course.

“When money is scarce, [people] automatically give up savings first and that’s not the best strategy,” she said. “When you’re in a market decline or correction, that’s actually the best time to invest money in the markets because you’re buying stocks on sale.”

Wiese, owner of Grand Wealth Management in Grand Rapids, said the temptation is to get in and out of the stock market, but his advice is to find a level of risk clients can be comfortable with in good times. and the bad times.

“There’s so much risk, especially for self-directed investors, that you really have the potential to hurt yourself more than help yourself if you bounce back and try to play different angles or time the market,” he said. she declared.

She calls this strategy having investment stamina. The advice is adapted according to the stage of the client’s life. Wiese points out that younger people should put money into their retirement accounts now so they can capitalize on compound interest, while older clients will want to start switching to safety net investments like bonds.

Headlines through 2022 warned of interest rate hikes, but now that the economy is in a period of sustained inflation, concern is mounting over an impending recession.

Fillmore reminds its clients to regularly reassess their cash flow to ensure they are comfortable with the amount of their investment so that it does not exceed daily needs. But, in the end, the best financial advice is the simplest:

“There’s only so much that individuals can control, so you can’t worry about what you can’t control,” she said. “You only focus on the things you can.”

Learn more about MLive:

‘We just want a break’: Michigan residents struggle to survive inflation

Inflation is costing Michigan households nearly $300 a month

Don’t Forget Crowdfunding, Cryptocurrency, and Gig Dollars on Your Taxes

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