To worry, or not to worry. That is the question – at least with regard to inflation.
After operating at an annual rate of 1.4% in January and 1.7% in February, inflation soared to 2.6% in March, leading some experts, including the Oracle of Omaha itself, to sound the alarm bells about soaring prices.
“We are seeing substantial inflation,” Warren Buffett told attendees at Berkshire Hathaway’s annual shareholders meeting last week. “We are raising the prices. People are raising the prices to us, and that is accepted.”
Ordinary Americans search online for “inflation” more frequently now than they have in more than a decade, according to data from Deutsche Bank strategist Jim Reid.
Here are eight strategies that can help you worry less about the impact of inflation on your finances – or even help you get ahead – if inflation takes off.
1. Increase your earning capacity
When inflation occurs, you can think of it in two basic ways: one is that prices go up; another is that the US dollar is losing value. Either way, making more money is a pretty safe solution.
If you’re currently out of work or facing reduced hours, consider using the extra time you have available to develop your skills and position yourself for a bigger paycheck.
You can use these skills to start a freelance business or check out the latest job openings if you think it’s time to change jobs with a higher salary and more opportunities for advancement.
2. Play the stock market
Stocks have historically outperformed inflation to a large extent, making it one of the strongest hedges against it.
You can use inflation to your advantage by investing in areas of the economy that may benefit from rising prices, such as food, technology, building materials, or energy. Listed companies like consumer products giant Procter & Gamble, burger chain Shake Shack and medical supply maker McKesson have all raised prices or are planning increases for later this year.
There are a number of innovative applications that can help you invest in the market. Weigh the pros and cons of each, find the one that meets your financial needs, and get in the game.
3. Get valuable
Inflation fears have always been good for durable assets like gold and silver. Both commodities have performed well over the past five years, with the value of gold increasing by 44% during this period and the value of silver increasing by more than 54%.
You can own precious metals directly by buying coins or bars, or you can take a more passive approach and invest in ETFs that hold real gold and silver. There is a very popular app that can help you do this.
4. Capitalize on the scorching real estate market
Real estate has proven to be one of the most reliable long-term investments you can make.
The US real estate market has been on a serious upward trajectory since around the fourth quarter of 2011, when the median selling price was just over $ 221,000. By the end of the first quarter of 2021, it had risen to $ 347,500.
If you have the funds available to buy a home, start comparing mortgage rates today and get yourself the best possible rate. The lowest mortgage rates tend to go to borrowers with the highest credit scores, so do what you can to take them up a few notches.
If buying a home isn’t over your budget, you can invest in real estate without buying your own property by investing your money in a real estate investment trust or REIT.
5. Adjustable rates are not your friend
When inflation rises, so do interest rates. If you have adjustable rate debt, such as a credit card balance or a home equity line of credit, higher inflation will result in higher interest charges.
This is especially true for mortgages. If you have an adjustable rate mortgage, you may want to talk to your lender about refinancing and go for a fixed rate instead. This will ensure that you’ll pay the same interest rate until you decide to sell your home – or refinance it again at an even lower rate.
6. Reduce your debt
If you have significant debt, but a mortgage renewal or rate swap isn’t right for you, there are still options to reduce the amount of interest you pay to your creditors.
A proven method of reducing the cost of your debt is to take out a low interest debt consolidation loan. By consolidating all of your high interest debt into one loan, it will be much easier to schedule one payment to one lender rather than several.
7. Reduce any remaining costs as you can.
You’ve probably noticed by now that most of the suggestions here involve spending money. But cutting spending is also a great hedge against rising inflation.
You may be paying more than you need to for your insurance products, so make the comparisons. You can find a better deal on your auto insurance or save hundreds of dollars by comparing home insurance rates.
And don’t mind cutting coupons, even Buffett does.
8. Stay the course
Not everyone thinks that the recent spike in inflation is a sign of things to come.
Buffett himself has said that inflation doesn’t seem to keep many Americans from spending.
“People have money in their pockets and they pay the highest prices,” he told his Berkshire Hathaway followers at the May 1 meeting.
So if you’re comfortable enough with your current finances to absorb the higher prices – and maybe even have some spare currency to invest – you might want to ignore the hype and keep doing this. you are doing.