Money

5 Ways To Protect Your Money When Inflation Spikes

A key inflation indicator tracked by the Federal Reserve hit a new high in December of 2021. The core Personal Consumption Expenditures Price Index increased by 4.9 percent over the previous year. The index tracks the prices we pay for products and services in the United States. It does not include food and energy due to fluctuating prices. The 4.9 percent surge was the largest since September 1983, setting a new record.

You may not be startled by this news, as many have dealt with constant price hikes and financial uncertainty following these events. Inflation has persisted longer than many had thought, despite predictions from some experts that it would be temporary. Because pandemic conditions have contributed to increased costs and supply chain concerns, there may be no fast solution.

However, experts believe there are things we can do to keep up with escalating prices.

1. Continue to invest.

Even in the midst of market changes, owning equities is still the best method to protect against inflation.

Stocks have a proven track record. Over the past 90 years, equities have produced returns that have outperformed inflation. The key to success is to create a diverse portfolio that can withstand market ups and downs and then revisit your strategy as needed.

Don’t let climbing prices and worries about supply chains throw you off track and cause you to make rash trades.

2. Make adjustments to your spending.

In an ideal world, your income increases at the same rate as inflation. If it doesn’t, you might have to cut back on your expenses.

This is especially true for retirees who plan to live off a portion of their assets. Many financial planners agree that an annual withdrawal plan of roughly 6% should allow you to maintain the pace of inflation due to predicted gains in asset value.

Keep in mind, you’ll want to trim the budget if you’re a retiree having trouble paying for particular products and services. Variable costs, such as entertainment, are a good place to start.

This year, Social Security recipients received a 5.9 percent increase in their monthly checks as a result of the largest cost-of-living adjustment in 40 years. If you’re still working, try to aim for an annual raise in salary or wage of  at least 3% each year to keep up with inflation.

3. Review the payment plans for your debts.

Fixing costs is a terrific method to counteract growing prices. Many financial professionals have advised clients to refinance their mortgages at fixed rates of 15 and 30 years.

A fixed-cost mortgage with a set interest rate means the expense, which is typically one of the bigger costs in a budget, will not rise with inflation. It’s also critical to refinance or pay off any other loans you may have.

When purchasing new things, look for deals that offer zero interest for long periods of time, such as 36 months, on items like furniture or appliances.

Remember, a single dollar is worth a little less each day.

4. Change how you drive and consume gas.

While it can be difficult to find a decent deal on both new and old cars, some electric vehicles are readily available at dealerships. Furthermore, you may be able to completely eliminate your dependence on gas as a result of such a purchase.

If you don’t want to buy a car right now, you may still save money on gasoline by installing an app that finds the best deals in your area.

Another trick? Don’t fill your tank when gas prices are on the rise. Buy only what you think you’ll need. When the cost per gallon starts to come back down, you’ll have more room on the tank for the cheaper gas. Use a map app to calculate the most efficient routes and combine your trips as much as possible. Don’t forget about car-pooling with friends and coworkers and be sure everyone pitches in for gas!

5. Save money by bundling your purchases.

As vehicle and home construction costs rise, bundling purchases and projects can save money on those big-ticket expenditures.

Are you renovating your home at the same time as a neighbor? By bringing in the equipment only once, the contractor may be able to work on both locations and offer a 10-20% discount.

Buying a car works on the same principle. You might be able to get a better price if you go to a dealership with a friend and buy separate vehicles than if you went alone.

Inflation is a fact of life. To weather the storms of sometimes unexpected price increases, save and invest wisely, and be prepared to modify your habits as a consumer. Making the most of every dollar and giving that dollar a chance to grow is crucial.

Finally, make sure you are getting rewarded for your hard work. If you are employed, you deserve annual evaluations and an opportunity to have your paycheck keep up with inflation. If you are self-employed, be looking for opportunities to grow your income each year.

You deserve it!

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