It is impossible to avoid inflation in a thriving economy. This is because inflation is a term that describes the gradual increase of the prices of goods and services. When this happens, it is usually accompanied by a decline in the currency value in an economy. Inflation is easy to notice. In your day-to-day life, you must have seen an increase in raw materials and other goods used for production. Whenever you take your car to work, the money used to fill your tank can no longer do so. In the financial news, you will see them using the term frequently to explain what is happening globally.
If you are a housewife, you will understand the term “inflation” properly because you know the stress you go through when shopping. You are often surprised by the sudden increase in the price of goods which makes stocking your fridge challenging.
Understanding how inflation works is essential in devising ways to cope with it. Inflation may be unavoidable, but you can reduce its impact on your life. Many successful people have been able to insulate themselves from inflation. And it leaves the rest of the world wondering, “how”? This is easy to answer. Successful people know that the more the prices of goods and services increase, the more there is a decrease in purchasing power. For instance, the same amount used to cater for a household will no longer be sufficient for the family in the face of inflation unless there is an increase in the money being provided for sustenance.
There are times when inflation is short-lived. Other times, it lasts for a prolonged period of time. In the cases of short-lived inflation, it can be traced to an issue with supply and demand. When there is a lack of balance between supply and demand, it can lead temporarily to an increase of the prices of goods. Furthermore, inflation lasting for an extended period of time is usually connected to many factors that cannot be easily addressed. Those factors will gradually increase the prices of goods and services. This is why the strategies are essential for you to cope with inflation. In the face of inflation, who says you cannot grow your money?
Strategies to Cope With High Inflation
Build an Emergency Fund
One of the best ways to protect your finances during inflation is to build an emergency fund. No one is above life-changing situations; an emergency can always hit anybody. If you don’t have any cash reserves, how do you intend to survive? Building an emergency fund may not help you build wealth during high inflation, but it allows you to survive while you figure things out. Therefore, having a cash reserve is the first step to coping with high inflation. Once there is an increase in the prices of goods, the first thought on everyone’s mind is, “how to survive?” You need money to cope with temporary price fluctuations. An emergency fund will assist you in taking care of extra costs on all items. For instance, if there is an increase in the price of fuel, this can affect your mobility temporarily. However, having an emergency fund will give you peace of mind. Besides, if you don’t have an emergency fund, you can consider starting one. However, don’t fail to consider opening a high-yield account that can protect your money from devaluation. Some emergency accounts assist you by offering you an appreciation for saved capital. You need to save your money in an account that is easily accessible. The aim of opening an emergency account is to keep you from borrowing money when situations come up. Then, what use is the account if it is not easily accessible when you need it most? The bottom line is your emergency fund should not be in an account that is difficult to withdraw.
Having a Diversified Portfolio
In addition, there is an intelligent way to achieve every result. In high inflation, the thoughtful process lies in having a diversified portfolio. For example, there is a difference between an investor who invested all he has in a single asset and an investor with a couple of investments in his portfolio. As an investor, you need the ability to see the future. You don’t have to go into the future before you predict what can happen with your invested capital. For an investor, the goal is for every invested asset to appreciate over time. Don’t position your money in a single investment option. You need to ask yourself, “what if something goes wrong with the investment?” If the investment doesn’t go as planned, do you have another option to turn to? This is why a diversified portfolio should be a must for everyone intending to invest. A dollar can outpace inflation if you can critically plan how to position yourself for maximum yield on invested capital.
Now, the question is, “what are the things that you can invest in”?
Gold is one of the safest investment options that we have. This is because when you buy gold, it always appreciates. For instance, it is easy for investment options like stocks to fluctuate, but gold only increases in value. If you are looking for a way to protect your wealth, buy gold; it’s an asset worth owning. If you purchase gold today, it can permanently save you when there is economic instability. Have you ever heard of gold dealers going bankrupt? Of course, no, unless they were robbed of their assets. Gold is an inert metal, and it has a history of value and riches. Gold fulfills one of the functions of money, which is a store of value. Gold helps to preserve the value of money for as long as you desire. Have you ever wondered why rich people always have gold in their investment portfolios? It is simply because gold will continue to grow over time. In addition, if you have gold, you can always sell it when you need money.
Gold speaks of safety. Even if you have invested in other schemes, it will be an exceptional idea to buy gold. It is a tangible asset, and you don’t have to be scared of misuse or losing it. For example, if you want to travel from one country to the other, you can safely carry your gold along. And nobody will realise that you have a bar of gold with you. Most importantly, it is effortless to sell gold when compared to other investment options like stocks or bonds. If you have any gold for sale, you can visit reliable jewellery dealers. They will recognise it, and you can state your deal, and you get paid if the buyer is interested. Straightforward right?
Real Estate Investment
If you don’t like buying and selling gold, you can consider real estate investment. This is an investment option that brings in significant money. Real estate has assisted many individuals in becoming financially stable. When some people hear real estate, they think it involves buying land alone. There is more to real estate than land purchasing. Real estate comprises renting out an apartment for a monthly fee or buying old houses and reselling them to those needing them. All these options are financially safe and secure means of wealth building. For example, if you have land and there are political issues, your land will not be affected by whatever is going on in the country. When compared to stock, it is safer. The value of the stock can drop due to many factors like wars or other calamities.
Moreover, you don’t need extensive knowledge before investing in real estate. What is essential is to have a legal body that can stand in for you and ensure that you are buying the property from a secured and trusted source. For stocks or bonds, you need vast knowledge to understand what is going on with your investment. There are many terms used in the stock market that you must understand. If you don’t know them, it will affect your trade. What you need in real estate is basic information on vacant homes that you can buy, renovate and sell for profit. Those into real estate testified that real estate is a lucrative investment with high returns, especially when you get landed properties for a low price.
A dollar’s value instantly decreases when there is high inflation in the economy. One of the easiest ways to help yourself and assist your family is to demand a raise politely. Your employer needs to understand that you must keep up with the cost of living. There is no need for your payment to remain the same when the prices of goods have skyrocketed. Paying bills will become challenging if you don’t have enough money to do what you want, especially when you have a large family to cater to. Generally, some companies increase the wages of their employees over time. If you work in such a company, there may not be a need for you to seek a raise since the increase in wages can cover inflation.
I hope you enjoyed this information. You need to apply what has been discussed today in your financial life. Study the result, and don’t fail to leave a review. You can check out also these related posts on Money Saving Tips During Inflation. See you next time!
Recommended books for further reading:
- Positive intelligence by Shirzad Chimene
- Click Millionaires by Scott Fox
- The one thing by Gary Killer and Jay Papasan
- The Barefoot Investor: The Only Money Guide You’ll Ever Need
- Investing Demystified: How to create the best investment portfolio whatever your risk level
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