How to Protect Your Savings Against Inflation

  • Because you could never learn "too much," when it comes to managing your money...

Today, investors are more concerned than ever about how inflation might impact their financial situation. If you are saving for retirement, inflation concerns may have you wondering if you will ever be able to truly retire. Even though it is impossible to avoid inflation altogether, there are a few things you can do to make things easier on your portfolio.


Investing in Real Estate

Real estate can help you protect your savings against inflation. As services and prices become more expensive, rents and home prices often go up as well. Having real estate investments can give you a bit more monthly income, and it allows you to protect your portfolio when the cost of living rises again.

One of the most popular ways of entering real estate investing is by acquiring a vacation rental home. However, if you want to make the most of your investment, it’s important to understand all the factors, including strategic financing. Learning more about your financing options ensures this investment will pay off. If you want to know more, you can look over a guide to help you understand your options when it comes to financing a rental property to help you decide.

Consider Commodities

Raw goods, such as agricultural products, oils, or metals, have become more expensive, meaning they can help you hedge against inflation. Just know that commodities are often riskier than traditional investments. The market value of these depends a lot on supply and demand. Just because food prices have gone up does not mean a specific agricultural product will be more expensive. If there is a high enough supply and low enough demand, prices may plummet.

Cryptocurrency

Cryptocurrency should theoretically protect your portfolio against inflation because there is only a limited supply. However, because it has not been around as long as some of the other options, it is uncertain whether it is a good long-term option. In fact, it can be challenging to integrate cryptocurrency into your portfolio. Luckily, you can take advantage of several apps that can help you take advantage of this option.

Investigate Inflation Protected Securities (TIPS)

TIPS are a Treasury bond issued by the United States government, making them a relatively safe option. These bonds have been designed to increase their value to keep up with the rate of inflation. The Consumer Price Index plays a role in how valuable the bonds are, and changes in the price index cause the bonds’ principles to change. However, if you plan on selling them, check the current interest rates. If you sell them when interest rates are low, you might lose some of the initial money you put into them.

Be Careful with Cash

When times are uncertain, having plenty of cash on hand can give you a sense of security. However, having too much cash on hand can be counterproductive when prices are rising. The more money you have just sitting there, the more purchasing power you lose. If you already have money invested in the market, taking it out can lead to lower performance overall. If you can stand a little bit of risk, you have a much better chance of hedging your savings against inflation. Even if you miss out on a few great days in the market, your wealth can take a significant dip.

Consider Stocks

Stocks are a great long-term investment, but if inflation goes up, they may temporarily go downhill. It’s a good idea to spend some time looking over funds that have historically performed well, even if they have experienced recent drops. If you have never invested in stocks, you can get started easily. You can choose one of the many trading and brokerage platforms for an account. Look for platforms that offer a user-friendly experience and that have a wide range of options to choose from. Many also offer educational resources, which can be helpful if you are new to this.

Look Over Your Budget

Inflation has greatly impacted the way consumers spend their money because many people have cut back on the nonessentials, such as dining out or entertainment. Changing spending habits can help you make the most of the money you have when it comes to the nonessentials.

Of course, you likely have no choice in the amount of food you need to buy for your household, but other essential goods may be able to be delayed for a while.

Furniture, appliances, and used cars have all seen large price increases over the past year and a half, so, if possible, consider delaying these purchases. If the purchase can’t wait, shop around to find the best deal, or see if anyone in your area is selling a used one. These can help you save as much money as possible during a time when spending power has been eroded significantly.

 

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