18 Money Mistakes to Avoid as Inflation Rises

1 | Not Consolidating Your Debt

Consolidating high-interest credit card debt onto a 0% card can save you serious money, especially now. "With interest rates up, the average credit card APR is now over 21%," says money-saving expert Andrea Woroch. "When it comes to credit card debt, the fastest and easiest way to dodge high-interest fees is to use a balance transfer card." These cards allow you to pay off your debt without interest for up to 21 months. "Not only does this allow you to pay down debt faster and save on interest, but for consumers struggling to come up with extra cash each month for savings or just to pay the bills, this move can give you breathing room in your budget as you fight back against inflation," says Woroch. You can compare balance transfer cards at sites like CardRates.com.

2 | Missing Out on Cash Back

"The best way to fight against higher consumer prices is to maximize cash back on each transaction," says Woroch. "Failing to do so is a missed opportunity to help pay down your credit card bill or the next expense you need to pay." She advises getting a cash-back card that earns rewards on the purchases you make most frequently or using cash-back tools like CouponCabin.com for in-store or online shopping. "You can even turn your receipts into cash back by taking pictures of each receipt using the Fetch app," says Woroch. "You'll earn points toward free gift cards to offset future grocery and gas purchases."

3 | Leaving Your Money In a Traditional Savings Account

"With interest rates rising, your savings can earn money if you're savvy about where you save," says Woroch. "The safest place right now is in a high yield online savings account (HYSA) since the cash is easily accessible, there is no penalty to withdraw, and you can make over 5% interest." For example, Bread Savings pays a 5.15% annual percentage yield (APY) on savings at the moment, compared to traditional banks that offer around 0.26% APY. 

4 | Not Paying Down High-Interest Debt (Or Taking on More)

"As interest rates climb, the cost of borrowing increases. Many forms of debt, like credit cards or lines of credit, have variable rates, meaning the interest you owe will rise alongside market rates," says R.J. Weiss, a certified financial planner and founder of The Ways to Wealth. "It's a smart strategy to avoid taking on additional high-interest debt during such times and to prioritize paying down any existing bad debt."

5 | Not Locking In High Interest Rates on Savings Where You Can

High-interest bank accounts won't earn above a 4% APY forever. "Economic conditions change, and the yields on these accounts can drop," says Weiss. "If you're relying on such income, especially for long-term goals like retirement, it might be worth considering more stable, fixed-rate options like Certificates of Deposit (CDs) to lock in current rates." Purchasing a CD at the current interest rate will earn you more money if those rates drop in the next few months or years.

6 | Not Building Your Emergency Fund

"Economic uncertainties, often accompanied by rising interest rates, can lead to job losses or reduced hours as companies look to cut costs," says Weiss. "Moving away from a paycheck-to-paycheck lifestyle by building a robust emergency fund can provide a financial buffer. Aim for at least three to six months' worth of living expenses to cover any unexpected disruptions in income."

7 | Living Beyond Your Means

"As prices rise, it's important to adjust your spending habits accordingly," says Ricardo Pina, founder of The Modest Wallet. "Remember: if your expenses outpace your income, you'll soon find yourself in debt and struggling to maintain a good quality of life." Create a budget that reflects your current financial situation and make adjustments as necessary, such as cutting back on unnecessary expenses or finding ways to increase your income.

8 | Investing Impulsively

"It's easy to fall into the trap of making impulsive investments, especially when you feel pressured to make a quick decision in the face of rising inflation," says Pina. "You might think throwing your money into the latest hot stock or investing in a promising start-up is the key to offsetting the impact of rising prices. However, acting on impulse without a well-thought-out plan can lead to significant financial losses." He advises doing thorough research, consulting with financial advisors, and considering your long-term financial goals before making any investment decisions. "Always remember: patience and prudence can be powerful allies in maintaining your financial stability," adds Pina.

9 | Not Diversifying Your Investments

"Inflation can have a dramatic impact on certain industries and sectors of the market. Rising inflation can cause stocks in consumer goods companies to underperform, while stocks in natural resource sectors may see an increase in value," says Pina. "By diversifying your investment portfolio across different industries and asset classes, you can minimize the impact of inflation on your overall financial health. It also helps to regularly review and rebalance your portfolio to make sure it aligns with your risk tolerance and financial goals." 

10 | Making Big-Ticket Purchases That Will Lose Value

"Hold off on big unplanned purchases of depreciating assets unless essential," advises James Williams, founder of TechPenny.com. "Big ticket items like cars drop in value fast. Consider less

expensive alternatives, or waiting until prices or rates decline to treat yourself non-essentials that won't maintain their worth." Concurs Andrew Lokenauth of BeFluentInFinance.com: "Focus your spending on needs, not wants. Distinguish between liabilities that cost you money versus assets."

11 | Not Negotiating Salary

Make sure you're getting paid what you're worth, whether it's a new job offer or a long-held position. "Don't assume standard cost-of-living increases," says Lokenauth. "Research market rates aggressively. Given high inflation, negotiate salaries based on real wage growth and merit. Consider pursuing higher-paying job opportunities if your current employer won't stay competitive."

12 | Chasing Quick Wins

Rising prices might tempt you to chase quick wins in the stock market. That is often a costly mistake. "Think about long-term investments as a mindset and approach rather than an individual asset class," advises Seth Wunder, CFA, chief investment officer and chief financial officer of the consumer-finance subscription service Acorns. "With a long-term investing strategy, you stay focused on realizing long-term gains even when short-term market volatility and your emotions pull you in the other direction."

13 | Trying to Time The Market

This is one of the most common mistakes cited by the experts we spoke with. "When the market tumbles, it’s natural to want to stop the bleed and sell losing assets," says Wunder. "But remember, historically, the market tends to reward a long-term outlook—every market downturn in U.S. history has ended in an upturn." 

14 | Going All-Or-Nothing With Savings and Investments

"Instead of just investing a large sum all at once, investing money regularly early on can help you build up enough to give yourself a strong financial future," says Wunder. "Start with $5 and get a head start. The earlier you begin, the more time that money has a chance to grow. 

15 | Losing Sight of Long-Term Goals

"Your goals can also help you avoid any knee-jerk reactions," says Wunder. "Depending on where you are in life, your long-term goals may be 10, 20, or even 30 years in the future. Someone planning for retirement, for example, may have a few decades until they hit their goal of retiring. What happens in the market today will likely have no bearing on their investments in a decade."

16 | Not Educating Yourself

"In times of economic uncertainty, it's so important to stay informed and educated about financial matters. Ignorance is not bliss when it comes to your money," says Pina. "Do your research, read financial news, and seek advice from experts. Don't rely on hearsay or rumors when making important financial decisions. By staying informed, you can better understand how inflation affects your finances and make smarter choices to protect yourself from potential risks."

17 | Not Managing "Lifestyle Creep"

In a time of rising prices, managing "lifestyle creep" is particularly important. "Lifestyle creep is basically an increase in spending as a result of enhancing one's lifestyle," says Jonathan Merry of moneyzine.com. "It happens because of self-control, or the lack thereof. Most of the time people who suffer from lifestyle inflation are oblivious that they have been spending more and more as their pay grade rises." In inflationary times, that essentially means you're spending more and more for less and less, potentially denting the savings or investments that can strengthen your financial future. 

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18 | Thinking Inflation Is Forever

"The worst thing is to fall into the trap of thinking inflation is here to stay," says certified financial advisor Greg Wilson, who retired at age 42. "Inflation and interest rates are just short-term changes. They are cyclical. Too many people think that high or low interest rates (or house prices or inflation) are a new normal. They aren't. They go up and down."  Wilson recalls his father investing in real estate in the '80s. "Inflation made him a lot of money. These days, he's all fired up about politics and inflation, forgetting it was inflation that helped him make his fortune in the first place," he says. "Don't get too caught up in the now. Keep your eye on the future."