Spending

Suze Orman on high inflation: 'There are only two ways to get through this.' Here's how

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Source: Marc Royce
Key Points
  • Inflation is at historic highs, well above anything the U.S. has seen since the early 1980s. 
  • "I personally believe that this inflation is here to stay for quite some time," Suze Orman, host of the “Women & Money ... and Everyone Smart Enough to Listen” podcast told CNBC.
  • "There are only two ways to get through this inflationary environment," Orman, who is also the co-founder of emergency savings firm SecureSave said.

The consumer price index, a key inflation gauge, rose 8.6% in May from a year ago — its highest increase in more than 40 years — as prices continue to surge in every category, from food, to gas, to housing costs.

"I personally believe that this inflation is here to stay for quite some time," said Suze Orman, host of the “Women & Money ... and Everyone Smart Enough to Listen” podcast. Last month, she joined CNBC Senior Personal Finance Correspondent Sharon Epperson on CNBC's Twitter Space conversation, "Invest with Pride: Ready. Set. Grow."

High inflation can have a significant effect on your finances. It's costing American households an extra $460 per month, according to economists at Moody's Analytics. 

"There are only two ways to get through this inflationary environment, and that really is to spend less and save more," Orman, who is also the co-founder of emergency savings firm SecureSave, told CNBC.

Here are two tips for achieving that amid rising prices.

Monitor your cash flow

As of May, 58% of Americans live paycheck to paycheck, according to a new LendingClub report. That means expenses consume most of their salary, leaving little to no spare cash for saving or investing.

Just scraping by is especially scary in this inflationary environment, Orman said. "If you are now scrambling where every penny is going out, that's coming in, you're in a situation where you need to cut down."

When it comes to spending, in order to figure out where you can cut back, "you have to monitor cash flow to change it," Mark La Spisa, a certified financial planner and president of Vermillion Financial in Barrington, Illinois recently told Grow. "If you don't monitor it, you can't manage it."

Before making a purchase, Orman suggests asking yourself if what you're buying is a need or a want. Orman has made this point before by using a daily takeout coffee habit as a want, since making coffee at home can save you money.

Pay yourself first

To save more in this environment, with every paycheck, be sure to "pay yourself first," La Spisa said.

This means transferring a portion of money to savings and investment accounts before you have the chance to spend it. Doing so helps you create an emergency fund buffer for the short-term, and keeps you progressing toward mid- and long-term goals.

Making transfers automatic can help you get into a routine. And even small amounts can add up.

Putting $100 into an IRA each month, for example, could grow to around $265,000 over 40 years with an average annual return of 7%, according to Grow's compound interest calculator.

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