Rising prices and uncertainty about their lifespan are putting Americans in a bad mood about the economy.
Inflation was significantly worse than expected in October, as the consumer price index rose 6.2% from the same period last year, reports the Labor Department.
This measure of the cost of goods bought by Americans – from health care to heating their homes – reached its highest level in more than 30 years, led by energy, shelter, food and cars.
When those numbers started to accelerate earlier this year, some pundits, including “the Oracle of Omaha,” sounded the alarm bells about soaring prices.
“We are seeing substantial inflation,” Warren Buffett told attendees at Berkshire Hathaway’s annual shareholders meeting in May. “We are increasing the prices. People are raising the prices for us, and it is accepted.
Here are eight strategies that can help you worry less about the impact of more expensive goods on your finances – or even help you get ahead – while inflation soars.
1. Increase your earning capacity
When inflation occurs, there are two basic ways you can think about it. One is that prices go up, another is that the dollar is losing value. Either way, making more money is a pretty safe solution.
If you’re out of work or one of the millions who quit their jobs during the Great Resignation, consider using any extra downtime you have to build 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 on the stock market
Stocks have historically outperformed inflation to a large extent, making it one of the best hedges against it.
You can use inflation to your advantage by investing in areas of the economy that could benefit from rising prices, including food, technology, building materials, and energy.
There are many innovative applications that can help you invest in the market. Weigh the pros and cons of each, find the one that suits your financial needs, and step into the game.
3. Be precious
Inflation fears have always favored durable assets such as gold and silver. Both commodities have performed well over the past five years, with the value of gold increasing 52% during this period and silver by around 49%.
You can own precious metals directly by buying coins or bullion, or you can take a more passive approach and invest in exchange traded funds, or ETFs, which hold both 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 seen a strong upward trajectory in recent years.
If you’re ready to move, start comparing mortgage rates today and get the best deal possible. Rates are still historically low, and the 30-year loan average is again below 3%.
Lower mortgage rates tend to go to borrowers with the highest credit scores, so do what you can to raise them a few notches.
5. Adjustable rates are not your friend
When inflation rises, interest rates rise too. If you have variable rate debt, like a credit card balance or 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 will pay the same interest rate until you decide to sell your home or refinance again at an even lower rate.
6. Reduce your debt
If you have significant debt, but mortgage refinancing or an interest rate swap isn’t right for you, there are always options to reduce the interest you pay to 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 budget for a single 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 an excellent hedge against inflation.
If you haven’t checked insurance prices recently, there’s a good chance you’re paying more than you need to, so do some comparison. You can find a better deal on your auto insurance or save hundreds of dollars by comparing home insurance rates.
And don’t laugh at the coupon cuts, because even Buffett does. A handy tool scans the Internet and finds you the best online shopping prices.
8. Stay the course
Not everyone thinks that the recent spike in inflation is a sign of long-term problems. Buffett himself notes that Americans still have money to spend.
“People have money in their pockets and they pay higher prices,” he told his Berkshire Hathaway followers at a meeting in May.
So if you’re comfortable enough with your current finances to absorb the higher prices, you might want to ignore the hype. Financial wellness isn’t always about cutting costs. You can generate additional income in the stock market using a popular app that helps you invest your “spare currency”.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.