Inflation Is On The Rise: Here's How You Can Prepare Your Finances
The COVID-19 Pandemic, and the measures used to contain it, caused a tremendous amount of upheaval. Companies went under, people were out of jobs, and supply chains were disrupted, leading to a bleak economic situation.
In order to deal with this, state and federal governments invested a lot of money into the economy, which has the unfortunate side-effect of causing inflation.
Inflation can wreak havoc on your financial health, which is why it's a good idea to prepare. Here are some ways you can do that.
Stockpile on Necessities
One of the biggest issues people encounter during times of high inflation is how basic, everyday necessities rise in price. Everything from food to toiletries becomes more expensive and while it may not seem like a tremendous expense at first, it can quickly add up.
A solution to this issue is to buy up, in bulk, items that you'll know you'll need in the future which are non-perishable. Staples like flour, pasta, rice, various canned goods, and items such as toilet paper or toothpaste should be stored away for future use. When bought early, ahead of inflated prices, you'll end up saving hundreds, potentially even thousands, of dollars on the things you use on a daily basis.
Consider Investing in Commodities and/or Real Estate
During times of high inflation, the value of commodities assets tend to rise substantially. In investment terms, commodities are basic material goods that are used to produce other goods (raw materials).
During inflationary periods, businesses can't keep up with consumer demands on their goods, which ends up causing prices to rise. In order to meet customer needs, production is ramped up, but that requires raw materials, which then causes the prices of those to rise. This makes investing in commodities a good investment strategy when inflation is increasing.
How you invest in commodities can take different forms, but the most common way is to purchase stock in a company that specializes in commodity extraction, distribution, or trading.
Strategize When It Comes to Debt
Inflation can have both a positive and negative effect on your ability to pay back your debts, depending on exactly what form the debt takes.
Loans that are locked into specific rates that don't change will benefit tremendously from inflation as effectively the debt will be less than what it was originally since it won't be able to take into account increased inflation. If you're in a position where you might need to go into debt sometime in the future, then taking out a fixed-rate loan before inflation starts to balloon could lower your repayment in the long-run a great deal.
Conversely, loans that have variable interest rates can be incredibly hazardous during inflationary periods as inflation will make it more difficult to pay bills for most people, but loans will still keep up with inflation. Taking out one of these when inflation is increasing would be a terrible idea.
Overall, depending on what kinds of loans are involved, inflationary periods might be a good time to take on debt or might be the worst time possible.
Develop Different Income Streams
Inflation causes a lot of turmoil in the economy and there's no telling what's going to happen next. It can result in a lot of companies rising in significance and others to fail spectacularly.
Given how many unknown factors exist when inflation is in play, it's a really good idea to develop multiple income streams. If you're currently employed at a company or self-employed on a platform, now's the time to consider creating an additional side business or two to supplement your income.
This helps deal with affording rising prices, but it's especially important to do as the company you work for might go under. With a few extra income streams at our disposal, you'll be able to better handle what life throws at you.
Finding Ways to Handle Inflation
Inflation isn't bad in all respects, but the reality is that it makes doing pretty much everything more difficult. It changes your financial investments drastically, increases the prices you have to pay, and can easily put your job at risk.
Finding ways to deal with the effects of inflation is incredibly important as not doing so could possibly put you in an incredibly dire situation, so be prepared if at all possible.