Inflation can be unsettling and even scary. It upsets plans and makes things like sticking to budgets and saving for the future a challenge.
If you’re trying to weather inflation as a consumer, it’s essential to prepare for what’s coming. We just entered an indefinite period of rising prices and weakening currencies as the world recovers from a pandemic and the ongoing crises that have come in its wake.
Here are a few tips for different ways to survive and even thrive in the inflationary period ahead.
Be Careful -- But Also Bold
Investing is a naturally cautious activity during economic downturns. Even so, you should also go about it with a certain degree of confidence. Simply sitting on cash is never a good idea — especially when the value of the dollar is eroding — and looking for both stable and innovative investments is always a good idea.
Regarding the latter, even in tough times, it’s possible to find unique investment options that come with built-in inflationary safeguards. These can help you maintain an upward trajectory with your wealth.
For instance, anyone committed to crypto may be feeling chilly during the ongoing crypto winter. Tokenized real estate offers investors a digital, more liquid option for hedging against inflation, paying with cash or cryptocurrency. Moreover, it adds a sizable dose of real-estate stability to typically volatile cryptocurrency holdings.
If you’re worried about inflation, don’t just pull your investments at the bottom of a dip. Instead, look for solid, forward-thinking alternatives that you can pivot to to keep your wealth growing.
Seek Out Stable Investments
The market saw a remarkable upswing in the wake of an initial crash in 2020. Then, things like unbridled optimism and a shift to volatile tech stocks sent the markets soaring for months on end.
This year has had a more sobering impact on investors. Unstable areas have come crashing back down to earth, leaving many investors wondering if there’s any form of stable growth that will yield more than that paltry tenth of a percent offered by their banking institutions.
Nevertheless, there are still tried and true options out there that can protect wealth against inflation.
As already mentioned, real estate remains a solid and predictable investment. Even with markets extraordinarily high and a correction possible, investing in property remains an option that investors know will never pull a Bitcoin and drop by half its value practically overnight. Other oft-recommended “safe” investments include precious metals, commodities, and Treasury inflation-protected securities.
Another strategy for investing during inflation is to shift away from growth stocks and focus on value stocks. Why? Because value stocks tend to be in industries that aren’t impacted by inflation to the same degree as others.
Value stock companies often can raise their prices to match inflation easier, making it safer for investors to count on protected stock value over time.
Evaluate Your Budget
As a consumer, take steps to influence the areas of your finances that you actually can control. You may not be able to predict the market or know which investments will statistically beat inflation over time. But you do know about your own finances and spending habits.
One way to protect wealth from inflation is to evaluate your personal budget. Of course, this is always a good idea, but it becomes a necessity during inflationary periods.
As prices rise, plan time to consistently re-evaluate your income and expenses. How are you allocating each dollar? Are things like growing grocery budgets or burgeoning rent undermining your ability to stay under budget? What steps can you take to help?
As you consider your budget, don’t be afraid to take things one step further. Is it possible to live not just within your means but below it? If you can get used to living on less than your current income, it gives you some breathing room as expenses continue to rise.
Set Up a Healthy Emergency Fund
The other thing to consider is your emergency fund. This is typically defined as between three and six months of expenses. However, even a fund that could cover a week or two of expenses is better than nothing.
If you don’t have an emergency fund prepared yet, it’s wise to start working on one. This may feel impossible with inflation already on the upswing, but there are many ways to find extra cash between the metaphorical couch cushions, such as:
- trimming your discretionary spending (eating out, streaming services, and so on);
- picking up extra work on the side; and
- setting aside at least a portion of any financial windfalls.
Remember, we’re potentially facing months and even years of inflationary pressure. It’s never too late to start squirreling away any spare change to help you in the future.
Inflation isn’t permanent, but it’s most definitely here to stay for a while. As consumers face the rising costs and investment curve balls that come with a weakening dollar, it’s important to keep both eyes open.
Look for both stable options and unique opportunities with your investments. Review your budget and try to live under your means. Keep your emergency fund stocked and growing.
If you can do that, you’ll be as ready as possible to face whatever financial conditions the future may hold.
Article by Deanna Ritchie, ReadWrite