January 20, 2015
It’s the bane of every businessman and salary earner worldwide, the root cause of rising costs and other financial woes. While inflation is a subject that remains highly misunderstood among lay people, it can have a very real effect on how you cope with your day-to-day expenses.
You may be unable to stop inflation, but that doesn’t make you powerless against its effects. Understand how it affects your purchasing power and you can start building effective strategies to protect your finances. Here are just a few ways you can prepare yourself for the barrage of higher prices brought about by inflation.
1. Learn the art of investing
Investments are among the best ways to insulate your life savings from the effects of inflation. By taking the plunge and putting your money in a diverse portfolio of stocks and bonds, you can grow your personal worth more quickly than if your money was idling in your bank account. Start paying more attention to financial news and trends to uncover where the smart investments lie.
See also: Bursa Investing Series 1: 5 Simple Steps to Start Investing in The Stock Market
2. Look for fixed rates
When it comes to inflation, time tends to be your biggest enemy. As prices grow across the board, so too do the regular dues and fees that come with most transactions. A fixed interest rate prevents your regular payments from ballooning along with inflation by keeping your interest proportional to your actual savings. Whether it’s on a personal loan, a savings account, or a future investment, you must find a deal that guarantees fixed rates for its duration.
3. Buy a home
And by “home” we mean an actual house built on a plot of land in your name. Owning a property means that you will have a concrete asset you can pass down to your descendants or use for a different purpose later down the line. If you can’t afford to buy a property with cash, you can shop around for a home loan at terms that agree with your current budget.
4. Keep your options open
As the motto of the Boy Scouts goes, be prepared. Always have a Plan B (or several) in the wings when things take a turn for the worse. Budget your income wisely and build an emergency fund. Look into inflation-proof assets like real estate, commodities, and income sources with steady cash flow. Maintain a clean lifestyle and find a good health insurance plan to counter the rising costs of medical care.
5. Live thrifty
As inflation often has an immediate effect on prices, one no-brainer solution you can try is minimising your spending. Keep frivolous spending to a minimum. Save on gas by carpooling, taking public transport, or even working from home. Be more strategic about how you use your credit card, keeping an eye out for low APRs, exclusive discounts, and useful rewards programs.
While some of these tips are simple enough for you to incorporate into your regular spending habits, others may require greater involvement in the long term. The good news is that financial literacy is the gift that keeps on giving, and can better prepare consumers for any future upheavals in the financial market. Get a head start on your finances today, and save yourself from a world of trouble tomorrow.
For more useful financial tips, keep exploring the CompareHero blogfor all kinds of timely money-saving advice.