Inflation is Coming! – Ways You Can Plan for Increased Prices

These days, inflation stares you in the face every time you fill the gas tank or go to the grocery store. In case you missed it, the commerce department reported back in March that the year-over-year inflation rate was 6.1 percent—the highest annual increase since 1982. This begs the question—what can you do to combat price increases?

Beating Inflation as a Consumer

Here are seven things you can do as a consumer to help beat inflation.

1.     Be brave enough to ask for a better deal.

There’s a common notion that prices aren’t negotiable, but they often are. The worst thing that can happen if you ask for a lower price is for the person to say “no.” They certainly won’t raise the price in response to your request, so there’s no harm in asking.

For instance, before buying any good or service, ask if there are any programs, discounts, or coupons you may qualify for to help you save money. If you carry a balance on your credit card, call the company to discuss your annual percentage rate (APR). It may be up for negotiation, at least temporarily, but only if you ask.

2.     Assess your recurring expenses.

So many monthly expenses are based on recurring subscription fees. Reassess your gym membership, streaming accounts, cell phone data plan, internet package, landline, and so on to see if you’re still using the services you pay for to the fullest. If not, reduce or eliminate your memberships to put money back in your pocket.

3.     Postpone big-ticket purchases.

It’s wise to consider the state of the economy and how the market is doing before spending a large sum. Ask yourself, “Is this really something I need to have now, or can I delay it?”

In today’s world, it might make sense to put off big-ticket purchases, particularly if you’re looking at something that has experienced heightened inflation due to supply shortages, such as a car, truck, or boat.

4.     Make a shopping list.

Go to the grocery store with a shopping list and commit to only buying what’s on it. The only exception to this is when non-perishable basics go on sale. Buy in bulk when the price is low, but be careful about things that can spoil quickly.

5.     Consider buying rather than renting.

Yes, real estate prices have gone up considerably, but so has rent. Inflationary rent increases could price you out of your apartment when your lease is up for renewal. On the other hand, if you buy, you can lock in a fixed-rate mortgage for the next 15 or 30 years.

6.     Be more energy-efficient.

To save on gas:

  • Group errands together so you’re not going out every day.
  • Plan routes strategically so you don’t have to drive out of your way.
  • Rather than driving to the corner coffee shop, try walking there instead. Or just take a walk around the block and go back home because that coffee is probably overpriced!

To save on energy bills at home:

  • Turn off the lights when you leave the room.
  • Install a programmable thermostat so the AC doesn’t run as much when you’re gone.

7.     Follow a budget.

Track your income and expenses to help you keep an eye on your spending. If you need to tighten your budget, make sure you know the difference between needs and wants.

Beating Inflation as an Investor

Here are four things you can do as an investor to help beat inflation:

1.     Diversify your portfolio.

This time-honored practice ensures you own different types of funds in your investment account. Certain assets perform differently at certain times, so a diversified portfolio protects you from the most damaging effects of inflation.

2.     Rebalance your portfolio.

Be sure to rebalance regularly. However, the best time to do this is when things are calm. When the market is chaotic, fear could be your driving emotion, causing you to overreact.

3.     Focus on large companies with long histories.

It’s easier for large, well-established companies with unique products to pass inflationary increases along to the consumer. Amazon, for example, can combat losses simply by increasing annual membership fees. This stability is good news from an investment standpoint.

4.     Steer clear of traditional bonds.

Long-term bonds often don’t perform well in an inflationary environment. After all, bond yields can have a hard time keeping up with inflation, especially when it’s coming in at 6 or 7 percent year-over-year.

If you’re concerned about the effects inflation is having on your budget and investments, turn to Nelson Financial Planning for advice. We’ll help you craft a successful personalized financial plan that provides you with peace of mind for the future. Contact us online or call our Winter Park, FL, office at 407-629-6477 today to get started.