Inflation means the cost of goods increases. Interest rates go up, groceries and gas cost more, and living expenses become significantly higher.
At times, inflation can cause companies to reduce work hours, reduce pay or even eliminate jobs.
In times of high inflation, your finances may become stretched and more uncertain. It can become harder to meet your financial obligations and lead to debt accumulation and stress.
Here are five saving tips from Taylan Evrenler to protect your money during times of high inflation.
Make a Budget
Budgets are the go-to starting point for most financial advisors.
You aren’t in control of money when you don’t know where it is going each month.
Track incidental expenses and find ways to reduce regular bills like electricity or food when possible. Set aside a fixed amount for discretionary purchases, such as keeping cash in an envelope. When it is gone for the month, time to stop spending.
Now that you know where your cash flow goes, it is time to stop the bleeding.
- Reduce or eliminate as many recurring bills as possible: rent, electricity, gas, phone, food, subscriptions, and online services.
- Home cooking is a great way to trim your budget and your waistline.
- Buy used exercise equipment and work out in the park or garage instead of renewing a gym membership.
- Find free alternatives to favorite pastimes. Check out free museums or concerts to enrich yourself.
- Instead of eating out on the weekends, invite friends over for a potluck or take turns cooking and hosting.
Save and Earn More Money
While finding ways to trim your budget, deposit the difference into a savings account.
If you do not already have an emergency fund, it is time to set one up. Strive for six months of living expenses in case your job is a high-inflation casualty.
At the same time, try to find ways to create additional income, such as micro-job apps like Field Agent or grocery receipt apps like Iobatta. Accept an Instacart order when you’re already planning a trip to the same store.
Also, take your skills online to service marketplaces like Etsy or Upwork and turn your free time into inflation-hedging income.
Diversify Your Portfolio
Regardless of the current economic outlook, it’s good practice to rebalance and diversify your portfolio every year.
Diverse investments can absorb losses from one area (stocks) and perform better in other areas (international, bonds, REITs, etc.).
Profit from High Inflation
Instead of taking a defensive financial position against inflation, why not profit from it?
Go on the offense by buying diverse investments. Real estate is a great place to start because property appreciates even during inflation. Plus, if you own a rental property, you can increase rents, and thus, your income.
Look into commodities like gold and silver. As inflation increases, other investors want tangible investments, so it’s a great opportunity for you to sell those commodities at a profit.
Bonds and fixed-rate securities are also excellent ideas. As interest rates increase, bonds pay higher yields. If you can buy the bonds while they have a high-interest rate, you’ll earn a greater profit than when interest rates are low.
Stay Focused on Priorities
When your finances are pressured by inflation, stay focused on what is most important. Avoid accumulating new debts you will have to eliminate later.
Keep saving money and investing. When the market is down, you have more buying power to scoop up more value for your dollar.
Maintaining control over your money helps reduce the stresses you face during a difficult economic time.
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