A quick trip to the mall, grocery store, or gas station is enough to tell you that the cost of goods and services is on the rise. Your money can’t buy as many things as it used to, and you may have heard that inflation is to blame.
No individual can change a country’s inflation rate on their own. However, this doesn’t mean that there’s absolutely nothing you can do to beat the ill effects of inflation.
Here are a few ways to preserve or even increase the value of your money amid rising costs:
1. Review your budget
Skyrocketing prices will take a toll on your budget, so it’s wise to review and recalibrate your expenses regularly. Look out for any costs that are taking a bigger bite out of your money than usual.
When you know where your money goes, it’s easier to identify areas where you can make changes. You may want to cut spending, find cheaper alternatives, or eliminate unnecessary expenses.
However, even if you’re frugal, prices can continue to rise and make it harder to stick to a budget. If you’d like to maintain or upgrade your lifestyle, you’d need to do more than tighten your belt.
Growing your money or earning from multiple sources can help address the effects of inflation.
2. Look into investment options
When inflation is high, your money can still maintain or increase its value if it appreciates at a rate higher than the price increases. One way to do that is to invest in assets that offer a rate of return which outpaces inflation.
Look into options that can help you with either or both of the following:
- Preserve the value of your money
There are safe haven assets that can keep or increase their value even during tough times for the economy. What counts as a safe haven investment largely depends on the specific cause of the poor market performance.
If you want to lessen the risk of losing money in times of high inflation, you can invest in assets that offer stability. The downside is that stable, low-risk investments typically have a limited potential to grow.
However, they might still be able to maintain your money’s value and purchasing power. A stable, sufficient growth is still better than keeping all your money in a savings account where it might grow slower than inflation.
- Grow your money at a higher rate than inflation
Certain higher-risk investments, like stocks, have shown in the past that they can outpace inflation. There is no guarantee, however, that they’ll always perform this way.
It’s important to do your research and find out which investment options have the potential to grow considerably amid high inflation. Take note that those with higher potential returns also carry a greater risk of loss.
Even if there’s a pressing need to grow your money, you shouldn’t automatically opt for high-risk investments to get the returns you want. Your goals, time horizon, and risk tolerance should play a part when making any investment decision.
3. Find ways to boost your income
Another way to increase your cashflow is to have additional streams of income. This may involve taking a second job or even starting a business, if you have enough capital.
Consider investing in income-generating assets if you want a passive way to earn something extra. These include bonds, dividend-paying stocks, or Real Estate Investment Trusts (REITs).
4. Remember to diversify
There’s no guarantee you’ll get the returns you expect when investing, especially when there’s trouble in the market. Diversification is one way to keep your money safe (and even growing) through hard times.
It’s ideal to invest in different types of assets so that if one loses value due to inflation, others might grow or least remain unaffected.
While inflation isn’t always bad, it can be a concern when prices keep rising and your income can’t keep up. Preparing for it means a higher chance for you to continue affording the things you enjoy or your other goals.
