Inflation was significantly worse than expected in October, with consumer prices soaring 6.2% from a year ago. That inflation rate was the steepest in more than 30 years, with energy, housing, food and cars leading the way.

When prices began accelerating earlier this year, some experts, including the “Oracle of Omaha,” rang the alarm on surging prices.

“We are seeing substantial inflation,” Warren Buffett told attendees at his Berkshire Hathaway company’s annual shareholders meeting in May. “We are raising prices. People are raising prices to us, and it’s being accepted.”

Here are eight strategies to help you worry less about the impact on your finances — or even help you come out ahead — while inflation flares.

  • Increase your earning power

When inflation flares up, you can think of it in two basic ways. One is that prices are increasing, another is that the dollar is losing value. Either way you look at it, earning more money is a pretty safe solution.

If you’re out of work or one of the millions of people leaving their jobs in the Great Resignation, consider using whatever extra downtime you have to develop your skill set and position yourself for a bigger pay-check.

  • Play the stock market

Stocks have historically outperformed inflation to a significant degree, making them one of the strongest hedges against high-flying prices.

You can use inflation to your advantage by investing in sectors of the economy that may benefit from rising prices, including food, technology, building materials and energy.

  • Get precious

Fears of inflation usually bring new attention to hard assets such as gold and silver. Both commodities performed well over the past five years, with the value of gold rising by 52% over that span, and silver’s increasing by about 49%.

You can hold precious metals directly by purchasing coins or bars, or you can take a more hands-off approach and invest in exchange-traded funds, or ETFs, which include commodities in their holdings but trade like stocks.

  • Capitalize on the scorching real estate market

Real estate has proven to be one of the most reliable long-term investments plays you can make. The U.S. housing market has been on a serious upward trajectory in recent years.

Mortgage rates are still historically low — the average 30-year home loan recently fell below 3% again.

  • Be wary of loans with adjustable rates

When inflation heats up, interest rates often rise. If you’re carrying any adjustable-rate debt, like a credit card balance or home equity line of credit, an uptick in inflation will result in higher interest charges.

That is especially true for mortgages. If you have an adjustable-rate mortgage, you may want to talk to your lender about refinancing and opting for a fixed rate instead.

  • Bring down your debt

If you’re carrying significant debt, but a mortgage refi or rate swap isn’t suitable for you, there are still options to reduce the interest you’re paying creditors.

By rolling all of your high-interest debt into a single loan, it’ll be much easier to budget around a single payment to one lender rather than several.

  • Cut all the costs you can

You’ve probably noticed by now that most of the suggestions here involve spending money. But cutting expenses is also an excellent hedge against inflation.

If you haven’t checked insurance rates lately, there’s a good chance you’re paying more than you should.

  • Stay the course

Not everyone believes inflation’s recent spike is a sign of long-term problems. Warren Buffett has noted that Americans still have money to spend.

“People have money in their pocket, and they pay the higher prices,” he told his Berkshire Hathaway devotees in May.

So, if you’re comfortable enough with your current finances to absorb the higher prices, you may want to ignore the hype.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Source: Clayton Jarvis, November 15, 2021.

How we help

We can help take the effort out of this for you by demonstrating how this would work for you and your family and providing you with one cohesive Financial Plan.

You can arrange a meeting by clicking here to access my diary, email info@smartfinance.ie or alternatively, call me on 087 8144 104.