Inflation has been a fairly popular topic lately. Over the past few months, the consumer price index (CPI), which is a measure of inflation, has risen to levels not seen since 1982.
Everything from food to gas to housing has become significantly more expensive, and the situation will not slow down anytime soon.
In a recent statement, Michelle W. Bowman, a member of the Federal Reserve Board of Governors, said she expects inflation to continue “through at least the first half of 2022.”
She added: “We may see signs of inflation easing in the second half of the year, but there is a significant risk that inflation will continue to be high.”
I don’t know about you, but we always like to be prepared for the worst. That’s why we interviewed a number of financial experts to find ways to increase our budget during these times of high inflation.
Here’s what they told us.
7 money to hedge against rising inflation
Rising inflation may reduce your purchasing power, but that doesn’t mean all is lost. There are a few adjustments you can make to save money and make the most of every dollar.
1. Review your mobile phone and subscription plan
A recent study by JD Power found that the average American pays $127.37 per month for their cell phone.
If you’re anything like me, chances are you haven’t looked at your contract since the minute you walked out of the store with your new phone.
Amy Maliga, financial educator at Take Charge America, a national nonprofit financial consulting agency, says that while expenses like a cell phone bill and subscription “may seem small, those small expenses can add up quickly.”
She recommends contacting your wireless provider and seeing if you can negotiate a lower rate. If that doesn’t work, consider other options.
For example, Visible, owned by Verizon, offers unlimited data, text messages, and phone calls for just $25 a month. The $40/month Visible Unlimited Plan is designed to help you save on costs without sacrificing service. A key benefit of subscribing to a Visible plan over other discounted cell phone providers such as Cricket (AT&T powered with unlimited data plan starting at $55) and Metro (powered by T-Mobile with unlimited data plan starting at $60) is that Visible is not only the more economical service of the three, but also provides impressive coverage because it runs on Verizon’s powerful network.
The company also offers three months of wireless service for just $20 per month when switching carriers. You can learn more here and use the SINGLE code to take advantage of this offer.
When it comes to your streaming and gaming subscriptions, Maliga recommends choosing your favorites and setting aside the rest. You can also share accounts with your parents or friends to save money on these services.
2. Change the way you shop
If your trips to the grocery store are starting to feel more expensive, that’s because it is. According to the Bureau of Labor Statistics, food prices in general have risen sharply this year due to inflation.
Taylor Sutherland, senior wealth consultant at Halbert Hargrove, a financial planner, says saving money on these things “is all about changing the mix. Pay attention to what you buy and don’t be afraid to change.”
In other words, if the brand in the store is cheaper than the well-known brand, choose the cheaper option instead. This applies to both groceries and over-the-counter products, as these are the items that typically consume the majority of most people’s budgets.
In addition to choosing a cheaper brand, you should also consider buying things like laundry detergent, toilet paper, canned food, and other non-perishable items in bulk.
“If you know you can consume the whole set of goods, then buying in bulk is a good inflation-fighting strategy,” says Sutherland. “You’ll be buying at today’s prices, not tomorrow’s prices, which are supposed to be higher with inflation.”
However, when buying in bulk, Sutherland suggests keeping an eye on the “per unit” price to make sure you’re getting a better deal, as there may be times when buying in bulk will cost as much if not more than buying individual items.
Finally, Anthony Martin, founder and CEO of insurance agency Choice Mutual, advises using store coupons whenever possible and using a credit card to pay so you can earn cash rewards and maximize your savings.
3. Try a Green Approach
Gas and energy were the second sectors in which there was a serious jump in prices. The national average price per gallon just hit $4.33, the highest ever, according to AAA.
Although these goods always rise in price during periods of high inflation, this time the situation is likely to get worse.
Whether you remember it or not, Russia is one of the world’s largest energy suppliers. Economists expect Russia to face some heavy sanctions in the energy sector due to their actions in Ukraine, leading to faster rise in energy prices.
Katherine Valega, CFP and founder of Green Bee Advisory, a financial planning firm, says one way to protect your budget from inflation is to rethink energy consumption.
“As an environmentalist, I believe that high gas prices should make people reconsider their commute options,” says Valega. “Less cars, more bikes, walks, telecommuting, etc.”
You can also make some minor changes to your home, such as replacing conventional light bulbs with energy efficient ones, replacing old appliances (if possible) with ENERGY STAR certified ones, and taking advantage of the upcoming warm weather to air dry your laundry to save even more.
4. Carefully review your insurance policies
When was the last time you updated your insurance policies? If more than a year has passed, it may be time to change something.
“People should take some time to compare their policies with alternative providers, or even examine their policies in detail to see if all coverage is needed, or if there are potential savings from making changes,” says David Tuyo, CEO of the University. Credit union and co-founder of the Advanced Lending Institute.
“Sometimes you can even contact your insurance company and see if they can offer any more affordable policies based on any changes that may have occurred since your original enrollment.”
Another way to cut down on insurance costs is to upgrade to a plan with a higher deductible. While you will pay more out of pocket when you apply, having a plan with a higher deductible means you will pay less premium each month. This, in turn, can help you improve your cash flow.
5. Pay off, consolidate, or refinance high-interest debt
If you have debt, especially credit card debt, this might be a good time to focus on paying it off, as interest rates will only continue to rise with inflation, making your debt more expensive.
Brian Schmehil, senior director of Wealth Management at retirement planner Mather Group, says he recommends “opening a zero-interest credit card if you qualify and transferring the balance to give yourself time to pay off debt while reducing interest expenses.
Similarly, if you have variable rate loans, such as private student loans, you should work on refinancing your fixed rate loans to avoid any nasty surprises. However, this only makes sense if your credit score and/or income has improved since you took out these loans as you will be able to get a better rate.
6. Invest more, save less
In times of rising inflation, putting all your excess money in a savings account, money market account, or CD will not do you any good.
Why?
Because since their interest rates don’t keep up with the rate of inflation, that means you’re basically losing money in all of those accounts.
Christopher Lew, CFA and creator of personal finance blog Wealth Awesome, says the best thing you can do to protect your money from inflation is to invest some of it in things like real estate investment funds (REITs). in addition to exchange-traded funds (ETFs), which can allow you to earn over 9.5% per annum.
You can also invest your money in Treasury Inflation Protected Securities (TIPS) or Series I Savings Bonds, which are relatively low-risk and earn interest based on the current rate of inflation.
If you want to know more about how to protect your portfolio from inflation, you can read all about it here.
7. Increase your earnings
Shmekhil of The Mather Group says that if you can’t minimize the impact of inflation on your spending, the best thing you can do is focus on increasing your net worth.
“The job market is tight, so ask for a raise if you think you deserve it,” Schmehil says. “If that doesn’t work, you can change jobs as employers pay extra.”
And he also has a very good point of view. A recent Pew Research Center poll found that most of those who quit their jobs last year said it was “somewhat easy” for them to get their current position, while more than half said they now earn more.
So, if you’ve been thinking about improving your career prospects, now might be the time to do so.
In addition to changing jobs, Shmehil also recommends taking on part-time jobs to earn extra money. If this is something you would like to explore, here are some ideas to help you get started.
Summary
To protect your finances from inflation, you need to be smart and find opportunities to cut costs. Even minor changes, such as lowering your cell phone bill by switching to a discounted wireless service provider, such as Visible to moving debt from a high-interest credit card to a new card with an offer to transfer the initial balance of 0%, these actions matter in the fight against inflation. While it may not sound like much, trust us, small changes in your spending can make a big difference, even if inflation isn’t part of the equation.
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