Warren Buffett has sounded the alarm on inflation – 7 ways to be prepared

Prices are rising, but there are things you can do to reduce the impact on your wallet

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This article was created by MoneyWise. Postmedia and MoneyWise can earn affiliate commission through links on this page.

As the economy slowly rebounds after COVID-19, Canadians appear to have found a new source of financial anxiety: inflation.

In March, when the consumer price index was 2.2% higher than a year ago, Google searches for “inflation” were at their highest level since October 2008.

Searches rose twice on April 21, the day the Bank of Canada announced that inflation could reach and stay at 2% months earlier than expected by the central bank.

Some experts, including the Oracle of Omaha itself, have expressed concern about the price hike.

“We are seeing substantial inflation,” Warren Buffett told attendees at Berkshire Hathaway’s annual shareholders meeting last week. “We are increasing the prices. People are pushing us up on prices and it is accepted. “

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There are ways to prepare your finances to alleviate the ravages of inflation could cause them in the near future.

1. Increase your earning capacity

Teacher in class with mature students.

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When inflation occurs, you can think of it in two basic ways: one is that prices go up; another is that the Canadian dollar is losing value. Either way, making more money is pretty reliable coverage.

If you are currently out of work or face 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 self-employed activity or apply for the latest job offers if you think it’s time for a job change that comes with a higher salary and more opportunities for advancement.

2. Play the stock market

Businessman checks financial analysis on smartphone

Daniel Krason / Shutterstock

Stocks have historically outperformed inflation to a large extent, making it one of the strongest hedges against it. The companies you invest in will have their own inflation issues, but they often pass the increased costs they incur onto their customers, which protects their bottom line.

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. Take your first steps on the stock market with a investment app suitable for beginners.

3. Get valuable

Invest in gold.

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Inflation fears have always been good for durable assets like gold and silver. Both products performed well over the past five years, the value of gold increasing by 44 percent during this period and that of silver increasing by more than 54 percent.

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You can own precious metals directly by purchasing coins or bars, or you can take a more hands-on approach and invest in ETFs which contain real gold and silver.

4. Capitalize on the scorching real estate market

House sold above asking price.

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Real estate has proven to be one of the most reliable long-term investments you can make.

The Canadian housing market has been on a serious upward trajectory since the turn of the century. Home prices in Canada have risen for 18 straight years, topping things off with a 2016-2020 run that saw home values ​​rise by almost 40%.

If you have the funds available to buy a home, align with a trusted mortgage advisor who can compare mortgage rates from 30 of Canada’s largest lenders and find you a mortgage that’s right for you.

While you’re at it, check your credit score for free and see if it can be improved, which would help you get a better mortgage rate.

If buying a home is within your budget, you can invest in real estate by placing your money in a real estate investment trust, or REIT.

5. Adjustable rates are not the owner’s friend

Variable rate mortgage.

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When inflation rises, so do interest rates. If you have variable rate debt, like a line of credit or home equity loan, higher inflation will mean higher interest charges.

This is especially true for mortgages. If you have an adjustable rate mortgage and are nearing the end of your loan term, you may want to discuss with your lender the possibility of moving to a fixed rate before inflation hits you. This will ensure that you will pay the same interest rate until you decide to sell your home or refinance your mortgage.

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6. Reduce costs

Senior couple concerned about finances.

fizkes / Shutterstock

Reducing spending is an excellent hedge against rising inflation.

Save money on the grocery store by buying in bulk. With food prices are already on the rise, stocking up on perishables like flour, canned vegetables, and corn can help you save money if costs continue to rise.

You may be paying more than you need to for some insurance products, such as life insurance and home insurance. By making comparisons, you can find a better deal on your life insurance.

You can also opt for cash back to increase your budget. Some popular apps allow you to earn gift cards and cash simply by doing the same things you already do online. Other rewards you with real money.

7. Stay the course

Bank of Canada

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Even though the Bank of Canada has increased its projection for when inflation of 2% could be here to stay, “in the second half of 2022”, it is not quite around the corner. .

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.

If you’re comfortable enough with your current finances that you can absorb the coming months of moderately higher prices, you might want to ignore the hype.

This article was created by Wise Publishing, Inc., which provides clear, reliable information people can use to take control of their finances. Millions of readers across North America have come to rely on the Toronto-based company to help them save money, find the best bank accounts, get the best mortgage rates, and navigate many other financial matters.

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About Mary Moser

Mary Moser

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