6 Ways to Protect Your Finances from Inflation
If you've turned on the news recently, you've probably heard a lot of talk about inflation and the economic factors that cause it. You don't, however, have to fully understand how inflation works to feel its impact. Chances are, you've experienced that from "sticker shock" at the gas pump, where it now costs significantly more to fill up your tank. You may have even heard your parents talk about inflation in their own unique way.
"When I was a kid, a gallon of milk cost just 40 cents!"
However you experience it, inflation always delivers the same result: steadily rising prices that result in a decrease in your purchasing power. You cannot stop inflation from happening, but you can prepare for it. Here are some ways:
- Budget. If it seems like every personal financial lesson involves budgeting, it's only because it's true. In times of inflation, it's critical to look at where your money is going to understand how you can reduce your spending.
- Shop smarter. The easiest way to beat inflation is to find ways to cut spending whether that involves using coupons, switching to less expensive brands, or taking advantage of loyalty programs available with merchants.
- Reduce debt. Excess credit card and other high-interest debt can really drain your budget in good economic times, let alone during periods of inflation. An easy way to gain some budget room is to consolidate high-interest debt with a balance transfer offer or personal loan. If you manage to cut some of your other expenses, think about putting the extra money toward your debt payments.
- Refinance your mortgage. Speaking of reducing debt, with rates still low, you may want to refinance your mortgage. You could not only lower your payments, but also reduce the amount of interest you have to pay over the life of your loan.
- Boost your income. If you're thinking of getting a side hustle, now may be a great time. Or if it's possible, ask for a raise at work or extra hours.
- Review your portfolio. The best strategy for managing changing economic conditions is diversification. Talk to your financial advisor about the right balance for you.
Inflation can definitely put a strain on your budget, but with some smart steps, you can reduce its impact.