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A12 BUSINESS
Wednesday 19 OctOber 2022
Liz Weston: 3 inflation-savvy moves to make now

By LIZ WESTON But you don't have to ac-
of NerdWallet cept a brick-and-mortar
Inflation is proving to be bank's negligible return;
a stubborn, unwanted several online banks are of-
houseguest. No one partic- fering interest rates of 2% or
ularly likes paying more for more on savings accounts.
food, fuel and other living Perhaps you'll earmark
costs. But so far, the Feder- some savings for the vaca-
al Reserve's attempts since tion you want to take in a
March to evict inflation with year or the down payment
higher interest rates haven't on a house in five years.
worked. Because we may You could lock your va-
be stuck with this unpleas- cation money into a one-
ant roommate for a while, year certificate of deposit
we should consider how (some online banks are of-
best to cope. The following fering 3% on those ), while
moves could help. the down payment could
CRAFT A BETTER PLAN FOR be invested in a Series I sav- This undated file photo
YOUR CASH ings bond, which is yielding provided by NerdWallet
Many people live pay- 9.62 %. That's a great rate, shows Liz Weston, a columnist
for personal finance website
check to paycheck with obviously, but Series I bonds NerdWallet.com.
little savings. Other people have several restrictions: Associated Press
have the opposite prob- You can't withdraw money
lem: They're letting too for the first 12 months, and cused consumer advoca-
much cash sit idle in bank you'll forfeit three months cy group. You can ask your
accounts that aren't earn- of interest if you withdraw insurance company or
ing their keep. money in the first five years. agent to review your cov-
As of October, the nation- You're limited to buying erage and recommend
al average interest rate $10,000 in I bonds elec- appropriate limits, Bach
on savings accounts is just tronically at TreasuryDirect. says. But those estimates
0.17%, according to the gov each year and $5,000 may rely on problematic in-
Federal Deposit Insurance more in paper bonds annu- dustry software that could
Corp. Meanwhile, inflation ally using your tax refund. underestimate the costs,
as measured by the con- Consider using excess cash she says. She recommends
sumer price index is over to beef up your retirement you also talk to a contrac-
8%. accounts or investing that tor or appraiser who can
You can get inflation-beat- money in a taxable broker- give you an estimate of
ing returns by using savings age account, Henry-Mo- rebuilding costs per square
to pay down any high- reland says. A diversified foot in your area.
rate, variable debt, such portfolio of stocks is likely to RUN A TAX PROJECTION
as credit card balances. If outpace inflation over the If your earnings increased
your credit card charges long run, although the po- this year, you may be at
18% interest, for instance, tential for short-term losses risk for "bracket creep."
you're effectively getting means you shouldn't invest That's when you're pushed
an 18% guaranteed return any money you'll need into a higher tax bracket
by paying off that balance. within five years or so. — and face higher tax
Setting goals and timelines REVIEW YOUR HOMEOWN- bills — even if your pay isn't
for your cash also may ERS INSURANCE COVERAGE keeping up with inflation.
help you get more for your Building costs have been Dozens of federal tax pro-
money, Henry-Moreland soaring, and your hom- visions can be adjusted for
says. For example, finan- eowners insurance cover- inflation each year, includ-
cial planners typically rec- age may not be keeping ing tax brackets, standard
ommend maintaining an up. About two-thirds of ho- deduction amounts, limits
emergency fund equal to meowners who lose their for retirement contributions
three to six months' worth houses to wildfires or other and certain credits, says
of expenses. That money disasters discover their in- Melanie Lauridsen, director
should remain somewhere surance won't cover the for tax practice and ethics
safe and accessible, such complete cost of rebuild- at the American Institute of
as an FDIC-insured bank ing, says Amy Bach, execu- CPAs. Since 2018, however,
account, because you tive director of United Poli- Congress has required that
may need it at any time. cyholders, an insurance-fo- the IRS use a measure of in-
flation called the chained
consumer price index that
typically lags the consumer
price index. What's more,
inflation adjustments for
the following year are de-
termined using the infla-
tion rate in August, Henry-
Moreland notes. If inflation
spikes later in the year, as it
did in 2021, bracket creep
is more likely.q