Inflation can be devastating to our money, and what is scary is that many of us don’t even realize it. Although we may be thinking we are saving plenty of money, in reality, after you apply inflation, we could actually be losing money.
Described as the “Worst Tax,” inflation gets this less than illustrious name due to how it can actually lead to us losing money rather than growing our savings. As outlined by Investopedia, a hypothetical situation where this loss can best be realized is as follows: “earning 4 percent in a savings account while inflation grows at 7 percent makes many feel 4 percent richer, while in fact, they are 3 percent poorer.” To combat such a scenario, here are the best ways to ensure that you do not get hit hard by inflation.
Investing in yourself
One of the best investment strategies to combat inflation is simply investing in yourself. By devoting more money towards training and earning higher degrees, you push your income ceiling higher, allowing you to make more money while you are still working age. This investment comes with two benefits: not only does it make your salary inflation proof but it also makes your employment recession-proof. Don’t underestimate the value of yourself, and always find ways to increase this value.
Investing in stocks
Even though many do not have a lot of faith in stocks, they are actually a great way to combat inflation. According to the article “Timeless Ways to Protect Yourself from Inflation,” you will need to target specific companies. The best companies to invest in would be ones “that can increase their prices naturally during inflationary periods. Commodity resource companies are one example. Products like oil, grains, and metals enjoy pricing power during periods of inflation. The prices of these items will likely go up in periods of inflation versus the price of, say, a computer, which is subject to manufacturer and distributor adjustments.”
Investing in real estate
Purchasing real estate is another solution to overcome inflation. This investment is more long-term for it takes more time for real estate prices to adjust. But, as many people are seeing right now with the housing shortage, people are making record returns on their homes. Although markets change, now is one of the best times for sellers to offload their home. The demand is still very high, and the supply has yet to catch up.
Investing in savings
Another method that you can implement is to just increase the amount of money you are saving. According to this WiseBread article, a good practice to make adjustments to your savings contribution once every year to stay up to date with the current inflation. Although this may seem like a hassle, and you may be wondering how to remember to do such a thing, many financial institutions offer automatic adjustments for inflation. Confer with your own respective financial institution and see if they have any automatic adjustment tools that you can implement so that you can stay ahead of inflation rather than always playing catch up.