If everything seems more expensive, inflation could be to blame. An inflationary environment affects all aspects of our finances and savings – from buying groceries to fueling cars.
Inflation can eat into your purchasing power, but there are ways you can combat its negative impacts by making smart choices. Keep reading for some smart inflation hacks.
1. Move Cash to Accounts That Pay a Rate of Return
Though inflation cannot be stopped completely, you can reduce its effect on your wallet and financial plans by investing your savings at rates which surpass inflation’s rise over time. One such investment strategy would be moving into ones which provide returns exceeding inflation’s rise over an extended period.
Budgeting requires creativity in everyday decisions; for example, making changes like switching from name brand products to generics, finding great clothing and grocery deals, or taking public transportation instead of driving may all help save money in the long run. Furthermore, it might make more sense to wait before making major purchases such as homes or cars; prices could even drop during that period!
Inflation can have a dramatic impact on retirement plans, personal savings accounts and debt payments. But by understanding its mechanisms and taking proactive steps to minimize its effect, inflation won’t devastate your finances during times of hardship. Please note: this information should not be considered investment advice from legal or accounting sources.
2. Consider Alternative Investments
Recent inflationary increases have brought home to us the devastating impacts this can have on savings accounts. When inflation reduces its purchasing power, you risk not meeting long-term financial goals such as retirement from military service.
Although you can hedge some of your savings against inflation by depositing it in accounts that offer competitive returns, the best way to beat inflation lies in investing in assets which outpace it. Treasury Inflation-Protected Securities (TIPS) offer such protection, by adjusting interest payouts according to changes in CPI; plus they guarantee you will get back your original principal when the investment matures.
Other investments that could help combat inflation include real estate, private equity, hedge funds and digital assets. While these may offer higher returns, they also typically come with greater risk – talk to your investment advisor about these potential options as part of an overall portfolio strategy.
3. Don’t Overspend
An increasing inflation rate can quickly devalue any savings account you hold, so committing to budgeting may help lessen its effects. You can do this with apps, online spreadsheets or good old pen and paper; whatever method works for you can help give greater insight into how you spend your money.
Rising prices could impede your goals of paying off credit card debt or saving for retirement, such as saving enough to reach retirement. If this becomes an obstacle to meeting them, consider reaching out for professional guidance from a financial planner.
Professional assistance is invaluable in understanding how rising prices may erode your savings goals and implementing plans that address inflation over the long-term. They may even work with you to develop long-term plans which account for this effect on savings goals.
4. Don’t Forget About Savings
With some planning, inflation doesn’t need to derail your financial goals. By setting aside money in an interest-earning savings account, your increased purchasing power may help offset rising prices and keep them within reach.
Reduce costs and save by purchasing items less affected by inflation, such as switching to plant-based proteins at the grocery store or taking public transit instead of driving your own car to work. Making these changes could make an incredible impactful difference on your budget.
Consider long-term savings strategies like Thrift Savings Plans (TSPs) or index-linked savings accounts as they offer returns that keep pace with inflation or even exceed it.