What You Need to Know About Inflation
You’ve probably heard a lot about inflation lately but are you aware of how much it affects you and your household? Financial wellness is the key to living a holistic life, so understanding the effects of inflation and how you can deal with it best is important.
Please note the information in this article is for educational purposes only. Always consult with your financial advisor or a professional before making any financial changes.
Who is Affected by Inflation?
The truth is everyone is affected by inflation. It simply means that prices are increasing, and your dollar is worth less than it was before. In other words, the same dollar that paid for something yesterday won’t cover the cost of the same item today.
The good news is, there are ways you and your family can handle inflation in your household with these 5 simple tips.
Your budget is the first place to look when dealing with inflation. Try these tips:
- Cut back on unnecessary expenses
- Shop around for cheaper services (utilities, insurance, etc.)
- Prioritize spending where it’s necessary and cut back on where it’s not
If you have variable rate debts, this is a great time to determine what to do with them because with inflation usually comes much higher interest rates.
- Consider refinancing an adjustable-rate mortgage
- Apply for a 0% APR balance transfer credit card and transfer your debt
- Pay down debts you can pay down to avoid the interest rate hike
Don’t hide your cash under your mattress or keep it in a savings account at your local bank, it will lose value. Instead, try the following:
- Open a CD and lock in a higher interest rate on money you don’t need right away
- Invest in ETFs or mutual funds in real estate (a hedge against inflation)
- Open a high-yield savings account online
If your income isn’t enough, consider starting a side gig temporarily to outpace inflation.
- Start a freelance gig online using sites like Fiverr or Upwork
- Drive for Uber or Lyft
- Offer services in your area such as babysitting or pet sitting
Don’t let your retirement earnings wash away because of inflation. Now is a great time to do the following:
- Meet with your financial advisor to discuss the effects on your retirement account
- Reallocate your funds so they’re on target to meet your retirement goals
- Don’t stop contributing to your retirement funds
Inflationary periods can be scary, especially when they are as high as we’re experiencing now, but in the end, it’s a good thing. It means the economy is growing and we aren’t heading into a recession. Be aware of what you and your family can do to offset the risks inflation poses so you can continue living a stress-free and healthy lifestyle without the stress of your finances hanging over your head.
Hi, I am Dwayne your Financial Advocate and contributor to the Your Financial Wellness Blog. My goal is to provide you with the tools necessary to help you live financially well. Be sure to subscribe to the Your Financial Wellness Blog to know when I drop a new post.
If you are interested in learning how to create a household budget, tips on how to invest, how to set up your will an more than this is the place for you!