Inflation Is Cooling. Here’s Why Suze Orman Says That Doesn’t Matter

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Inflation is less rampant now than it was last year. Read on to see why you might still need to work on boosting your savings and adjusting your spending. 

Inflation was a major issue in 2022 — one that drove many Americans into credit card debt and forced them to raid their savings to stay afloat. But inflation has cooled nicely in 2023.

This past July, annual inflation was measured at 3.2%, per the Consumer Price Index. Compare that to July 2022, when annual inflation came in at 8.5%, and we’re clearly in a much better place.

But financial guru Suze Orman insists that consumers should not waste their time focusing on how inflation is being measured. Instead, she says, consumers should focus on their personal savings and finances.

It doesn’t always pay to look at the big picture

Keeping tabs on the Consumer Price Index can give you a sense of what living costs look like on a broad level. But Orman insists that measuring inflation levels isn’t really a good use of the typical consumer’s time. Instead, she says, consumers should look at their own financial pictures and see if there’s a need for changes or improvements.

As Orman says, “It doesn’t matter what eggs cost or what a gallon of gas costs if you don’t have the money to pay for it.”

And she’s right. You might prefer to pay $3.29 for a gallon of gas instead of $3.59. But if you can’t even afford the $3.29, you’re not in a great spot. And that’s something to focus on more so than broad inflation levels.

How to improve your finances

If you’re struggling to cover basic living costs like housing, food, utilities, and transportation, then it may be time to give your spending habits an overhaul. That could mean moving to a less expensive home or trading in a hefty monthly car payment for a smaller one. It might also mean cutting back on some leisure spending.

These are all difficult things to do. And in some cases, there may be a cost involved. You might have to spend $500 to move to a less expensive home. But if that saves you $400 a month in rent for the next year, it may be worth doing.

Now to be clear, you don’t have to go on an expense-cutting spree if you’re generally doing okay financially and occasionally have a tough month when unplanned bills come in. But if you’re struggling to cover your basic expenses month after month, then it may be time for some changes, difficult as those might be to implement.

As Orman says, “You’re okay to spend money if you have the money to spend…if you have an emergency savings account and you don’t have any credit card debt.” But people who are living paycheck to paycheck should aim to rethink their expenses and build up some cash reserves — especially those who have to stress about filling their gas tanks and buying groceries for the week.

In addition to reevaluating your spending, it’s a good idea to build some sort of emergency fund, even if it means starting out with a very small one. You’re better off having $50 or $100 in the bank for an unplanned bill than no money at all.

A good way to build savings is to automate the process by arranging for some money to leave your checking account after each paycheck and land in your savings. If you set that up to happen automatically, you’re less likely to end up not moving money into savings.

And again, if you can only swing $5 per paycheck for savings purposes, so be it. The key is to start somewhere.

Focus on you

Inflation may be cooling off. And that’s apt to impact you personally, because waning inflation can mean cheaper gas, groceries, and electricity.

But ultimately, Orman thinks it’s pretty useless for the typical consumer to track inflation. And she also doesn’t want to see too many people getting caught up in celebrating cooling inflation when their personal financial situations are dire.

So while it’s okay to be happy about the state of inflation now compared to a year ago, it’s even more important to examine your finances. And if you need to make changes to the way you spend and save, try your best to implement those as soon as you can.

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