“Inflation is a way to take people’s wealth from them without having to openly raise taxes. Inflation is the most universal tax of all” – Thomas Sowell
The term Inflation is used to describe the steady rise of prices for goods and services that affects all areas of the economy.
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How inflation works
In short, inflation is when the cost of things goes up. Inflation can affect items that you buy on a regular basis, such as food and petrol, but it can affect nearly every purchase that you make.
Here are some things that may impact inflation:
- an increase in supply and demand for certain products
- an increase in the cost of materials used to make goods
- an increase in production costs
- an increase in the price of goods (end product) – this could be food, clothing, transport, etc.
It’s important to have steps in place to deal with inflation so you don’t end up busting your budget, or worse, relying on credit cards and accumulating debt.
Manage your budget to beat inflation
With the price of food and energy rising fast, inflation is already hitting most of us right in the budget.
Negotiate lower interest rates
As costs for things like rent and medical care keep ticking up, remember you have the power to negotiate. It’s not guaranteed to bring the prices down, but it can’t hurt to ask. A lower interest rate will help decrease the repayment amounts. This means you’ll have more money available when inflation prices loom.
If you find the lender or seller isn’t willing to come down in price, consider other options.
Review your insurance
Do an audit of all the insurances you have – car, life, medical, etc. – including the costs and what they cover. You may be paying too much. Based on what you learn, shop around for other affordable options.
Read: What’s the difference between Life Cover and Funeral Cover?
Do an audit of your expenses
Make a list of all your expenses, including debit orders. Compare it to a bank statement and assess whether you’re overspending. For example, you may notice that you spend too much money on unplanned takeaways or new clothing monthly. Once you’ve identified ways to save, redo your budget, then stick to it.
Read: How to create a zero-based budget
Consider refinancing your home loan
If your repayments and interest on your home loan are hefty, you could consider applying for refinancing. Refinancing means you’d swap the terms of your old loan for new ones, based on the current value of your home and not the previous value. If this is successful, you’re likely to have a lower monthly installment. Chat to a financial adviser to decide if this is a good decision for you
Increase your income
You can make extra money outside of your job. There are options to sell things you’re not using on Yaga, Facebook Marketplace, or Gumtree. Another of increasing your income is by trying to think about how you could rent your stuff and get regular income coming in.
There are also a wide variety of side jobs with a flexible schedule that can be done from home. Pet sitting, online tutoring, or driving for a rideshare service could be done outside of your 9-to-5 job.
Read: 20 Side hustle ideas
Boost your emergency fund
The cost of essential expenses is rising much faster than discretionary items, and this means your emergency savings may need to grow too. We recommend setting aside enough money to cover 3–6 months of essential expenses in case of emergency. When you factor in the cost of inflation, is your emergency fund still sufficient?
And think about where you have the money stashed. Can you earn a higher return with a relatively low-risk investment that you can depend on if you do need to access it?
Need some cash to start your side hustle? FASTA and MPOWA can be of help with a short term loan.
Read: Why you need an emergency fund
Invest your money
Investing for inflation is essential for protecting your wealth. Plan for inflation by making your money earn. Choose an investment strategy that’s likely to give you a return that at least keeps up with the inflation rate. Look for assets that appreciate, that have a fundamental value of their own, or that pay interest at a fluctuating rate.
For example, consider a mix of commodities, real estate, and equities to offer some security.
Read: Types Of Stocks To Invest In
Pay down credit card debt
As the price of just about everything increases, it can be tempting to rely on credit cards to afford your expenses. But taking on debt can stretch your budget, and as the Federal Reserve raises interest rates to combat inflation, credit card debt can become even more expensive and difficult to pay down.
Making more than the minimum payment on your credit cards is critical to paying them off.
Read: How to use Debt Snowball to pay off debt
Are you drawing in debt? DebtSafe offers safe and secure Debt Consolidation.
No one is sure how long inflation will stay elevated above historical averages but it could stick around longer than anyone would like. Learning how to fight inflation, now and in the future, can help make sure your spending power can keep up.
Learn more by enrolling in our free courses:
- How to budget like a pro
- Master your money mindset
- How to build an emergency fund
- Investment Guide: What’s your ‘Why’ in investing
- Investment Guide: Investment basics
- Investment Guide: Investment options
- How to pay off your debt
- How to create multiple streams of income: 7R’s of wealth creation
The information in this article is for information purposes only and does not constitute professional advice.
