Tips to Survive Inflation: Learn to Use Your Money Wisely

Inflation is a frightening phenomenon that can take a bite out of your savings. Fortunately, you can use these tips to survive inflation and come out ahead.

How would you react if gas prices skyrocketed and your grocery bill tripled? How would you respond if the price of everything went up 10% every year? Inflation is a frightening phenomenon where costs go up for everything. Food, rent, clothing, utilities, and even education cost more than ever before. And it’s not just a passing phase; inflation will continue to rise over time. In fact, it spikes in response to the high demand for oils or other natural resources. Fortunately, you can use smart financial habits to survive inflation and come out ahead in the end. Read on for some tips on how you can use your money wisely during times of high inflation.

Causes of inflation

Inflation is a sustained increase in the overall level of prices for goods and services. The causes of inflation can be grouped into two categories: supply-side inflation and demand-side inflation. Supply-side inflation is caused by factors outside of the control of consumers and businesses, such as changes in the cost of inputs, changes in technology, or a decline in productivity.

Demand-side inflation is the result of consumers and businesses purchasing more goods and services than the economy can produce. This can happen when there is an increase in aggregate demand or a decrease in aggregate supply.

Create a financial plan

In order to survive inflation, you must have a financial plan to protect your wealth. This will enable you to maintain your purchasing power when prices increase due to inflation.

There are several ways you can go about creating a financial plan to survive inflation. You can start by putting aside a certain amount of money each month. This is a slow but steady way of putting away savings, but it will add up over time. You can also diversify your assets by investing in assets that will not be affected by inflation. This could be in the form of real estate, precious metals, or certain types of stocks. You can also protect your wealth by purchasing insurance on your assets, especially if they are at risk of being lost due to a natural disaster.

Build your savings

The best way to survive inflation is to have a healthy amount of savings on hand. If prices spike out of control, you’ll have a safety net to catch you and protect you from getting caught in a financial emergency. If you have $10,000 in your savings account, you can live off of that for a few months, even if the rest of your money is tied up or lost to inflation. 

You can also use that savings to take advantage of opportunities in a rising inflation environment. For example, if you see a great investment opportunity, but you don’t have the funds to take advantage of it, you can save up the money you’ll need and then execute when you have it. Having savings is critical in times of high inflation.

Don’t pay the retail price

When inflation is at its highest, it’s critical to think carefully about how you’re spending your money. If you blindly pay the retail price for everything, you could quickly find yourself in a difficult financial situation. Instead, look for opportunities to purchase items on sale or find cheaper alternatives that deliver the same results. 

If you have to replace your car or truck, for example, you can look for cars that were previously leased by companies. They’re usually cheaper than buying a brand-new vehicle at retail price. You can also consider buying used equipment and furniture for your home or taking advantage of other discounts you might be able to find.

Look for quality and durability

While you’re looking for cheaper alternatives in an inflationary environment, make sure you’re not skimping out on quality and durability. Having a quality espresso machine, for example, is something you can use for years and not have to worry about replacing. And even in an inflationary environment, durable items like espresso machines tend to retain their value. 

If you buy one and then sell it down the road, you’ll get most of what you paid for it back. In other words, a quality espresso machine can actually help you protect your purchasing power in the long run. You can do the same thing with furniture, clothing, and even food.

Be careful with credit, but don’t avoid it entirely

Credit, of course, is one of the biggest ways that people survive inflation. The nice thing about credit, though, is that you can use it to buy items now and then pay for them later. Yes, you’ll pay a little extra in interest, but you’ll also have the money to pay for it. If you’re financially responsible, you can use credit to buy things you need at a cheaper price than if you had to pay cash for them. Just make sure you don’t go overboard with your credit purchases. Make sure you can pay off those debts in a timely manner. If not, they could end up hurting you in the long run.

Find the Best Savings Accounts

When you’re trying to protect your purchasing power during times of high inflation, it makes sense to keep as much of your money in savings as possible. Unfortunately, many banks don’t actually pay you anything for keeping your money in a savings account. If you’re looking to protect your purchasing power, it makes sense to find an online savings account that actually pays you interest for keeping money in there. It’s definitely not a short-term solution, but it’s the best way to protect yourself from inflation. It’s also the best way to earn money from your savings.

Diversify your portfolio

When you’re saving for the long term, it makes sense to diversify your portfolio. In other words, don’t just keep all your money in savings. Instead, you should mix some of it with other forms of long-term investments like stocks, bonds, and more. If you’re diversified, you’re less likely to experience a significant downturn in any one investment category. Instead, you’ll have a few different things to fall back on if one investment goes down. That’s important to remember when you’re surviving inflation. Realistically, you’ll never completely avoid inflation. However, you can use these financial habits to protect yourself from it.

Hire a financial advisor

When we talk about saving for the long term, it’s a good idea to hire a financial advisor. They’ll have access to special tools that you won’t have, which means they can find better investments than you ever could on your own. They’ll also be able to help you diversify your portfolio and find higher-yielding investments that can protect you from inflation. That’s important to remember when you’re trying to survive inflation. If your investments are growing at a certain rate each year, it means you’ll have more money to spend each year too.

Stay away from equities

When you’re trying to protect yourself from inflation, it makes sense to avoid equities. After all, equities are investments that are tied to company profits. And if the company experiences inflation, those profits are likely to shrink in terms of purchasing power. In other words, equities aren’t the best way to protect yourself from inflation. Instead, find other investments that will pay you a set rate of return. That way, you’ll be guaranteed that you will have the same amount of money each year.

Bottom line

Inflation is a frightening phenomenon that can take a bite out of your savings. Fortunately, you can use these tips to survive inflation and come out ahead in the end. Build your savings, don’t pay retail price, look for quality and durability, be careful with credit, and don’t ignore your diet and fitness. Hire a financial advisor, and stay away from equities, and you’ll be well on your way to surviving inflation.