Will saving money become easier in 2023?

A couple worried about money, with laptops and bills.

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It could be, if it were a thing.

key points

  • Inflation is making it difficult for Americans to boost their savings.
  • If inflation slows next year, you may manage to increase your cash reserves.

If you’re having trouble investing your money saving account These days, you are in good company. In fact, many people are dipping into their savings to cover rising grocery, utility, and rent costs, among others.

Why has everything become so expensive? we can thank inflation For him.

Last year, Americans got a generous round of stimulus checks, and parents were eligible Enhanced Child Tax CreditHalf of which he got in monthly installments. But while this was happening, the supply chain was starting to slow down due to the effects of the pandemic. This created a huge gap between supply and demand, and unless that gap is bridged, inflation could continue to be massive.

But there is reason to believe that inflation levels will calm down by 2023. And so if you’re struggling to build up your savings right now, you may find that things really get easier next year.

Why can inflation go down?

For inflation to calm down, consumers need a reason to stop spending. And the Federal Reserve is giving them one.

The Fed is implementing interest rate hikes that are rapidly driving up the cost of borrowing. And the Fed hasn’t — it plans to go ahead with raising rates until inflation readings look more favorable.

This means that there is a good chance that coming next year, a reduction in consumer spending will result in a moderation in inflation. And if you’re not forced to pay as much for essential expenses, it should free up money to add to your savings.

Of course, the hope in all this is that consumers don’t cut spending because of higher borrowing costs. If this happens, it could lead to a recession, leading to widespread unemployment and other adverse economic consequences.

But despite that risk, the Fed thinks raising interest rates is the only way to break the current cycle. And so we have to hope that there will be a substantial drop in consumer spending to bring the cost of living back down.

Other ways to save money

If inflation stabilizes in 2023, it could work wonders for your savings. But sitting back and waiting for that to happen may not be your only option.

One thing you should know is that the current labor market is very strong, so you may have the option of finding a better paying job right now. Or, you can consider getting another job and use the earnings from it to pad your savings.

Another option is to carefully examine your spending habits and think of ways to cut back. This does not mean that you have to deprive yourself of every single luxury that makes life enjoyable. But you may find that there are bills you can shed without suffering. For example, if you order takeout every week because you don’t feel like cooking, you may find that inviting friends to cook together makes the meal more fun—and at a fraction of the cost. .

All that said, expect inflation levels to decline in 2023. But it’s also a good idea to take savings matters into your own hands, especially if you think your cash reserves may get a boost.

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