5 Ways to Gain Financial Control During an Inflation

Economic downturn and inflation are two terms you’ve probably heard more times than you’d care to admit over the past two years. Countries all around the world faced economic setbacks due to the pandemic that changed all of our lives to the point of no going back. Even though things seem to be looking up, many countries are still struggling to keep their head above water, facing massive shortages, skyrocketing prices, and inflation.

You may be considering switching from driving to public transport or picking the cheaper jar of peanut butter at the store, but the effects of inflation can last more than just the current period of your life. It is only wise to reflect on how it will affect your future plans, retirement, and savings. This way, you can prepare yourself for the upcoming changes and make the necessary plans.

Here are 5 ways to gain control of your finances, in the present and for the future, despite dealing with inflation.

Calculate CPI vs. PIR

CPI or Consumer Price Index is the measure of the change in prices paid by urban consumers for a range of consumer goods and services. The CPI will vary drastically depending on the country and even different cities within the same country, so make sure to check your local index.

By checking the CPI, you can compare it to your PIR or Personal Inflation Rate. Since everyone has different spending habits, the CPI isn’t an exact estimation that you can depend on. Knowing your PIR can help you gauge how much of your personal expenses are increasing. There are a number of PIR calculators online which help you do this in a quick and efficient manner.

Put Off Major Purchases

Now isn’t the time to go all-in with major purchases. If possible, put off buying big-ticket items like cars and homes. While you may be tempted by low auto loan rates, overall car prices have increased significantly due to inflation. The same can be said for the housing market. Although interest rates are low during inflation, house prices go up and you could get locked into a higher price than if you had waited a few months. You would be better off riding the wave and waiting for the inflation to go down a bit before signing on to an expense that is likely going to last well beyond a few years.

Save Less, Invest More

Investments have become an essential tool to the journey to financial safety in today’s climate. Thankfully, it is easier than ever before to invest with apps and websites dedicated to making it more accessible to regular people.

As prices surge during inflation, the value of your money drops. Therefore, it does not make sense to let it lie idle in your savings account while it depreciates in value. A better home for your money would be in a diverse portfolio of investments including the stock market, real estate, bonds, and others. However, it is important to be smart about your investments since inflation can affect them too. Experts suggest taking up investments that go up with inflation, such as Series I-Savings Bonds and Treasury Inflation-Protected Securities (TIPS). The stock market has also historically performed well even during inflation.

Level Up Your Income

While inflation causes prices to rise, you won’t be as affected by it if your income rises in proportion to it. In simpler terms, as inflation rises, so does your salary. The silver lining to inflation is that it affects wages as much as it does consumer goods and services.

However, just because inflation is going up, do not expect your boss to hand you a check with an extra zero in the coming month. It is up to you to do the work and look for better opportunities. If you are happy with your place of work, start by negotiating a pay raise. If your employer isn’t willing to go you one, it’s time to start looking for other jobs!

Invest In Yourself

When the future is uncertain, the best way to make sure that you end up OK is to invest in yourself. Investing in yourself is by far the best way to spend your money to secure your future. This could mean investing in your education and skills. Keeping up-to-date with current technologies and requirements in the job market will help you get firmer footing when it comes to financial safety. And it won’t hurt to have more achievements under your belt when it comes to that salary negotiation we talked about!