9 Genius Ways To Combat Inflation
Written by
Jordan Rosenfeld
Edited by
Amen Oyiboke
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Whether inflation is spiking or settling, it’s one of those facts of life and the economy that you can pretty much count on prices will rise, whether they do so quickly or slowly.
While you may not be able to make life less affordable, you can take some actions to help prevent inflation from eroding too much of your purchasing power.
Experts offer some genius ways to keep inflation from taking too big a bite out of your wallet.
Invest in Inflation-Protected Assets
While investments can be risky, one recommendation from Christopher Stroup, CFP and owner of Silicon Beach Financial, is to invest in Treasury Inflation-Protected Securities (TIPS), which are government bonds that adjust with inflation.
“They’re designed to help protect your purchasing power by increasing in value as inflation rises,” he explained.
Diversify Your Investment Portfolio
Diversification is another way to protect yourself over time against inflation, Stroup said. “Historically, equities have outpaced inflation over time. Investing in stocks, particularly those of companies with strong pricing power, can help your portfolio grow at a rate that beats inflation.”
Real estate is another useful asset to combat inflation, if you’re in the position to purchase some, he added. Property values and rental income often rise with inflation, making real estate a solid long-term hedge against inflation.
Reduce Your Debt
While paying down debt might seem like a strange way to combat inflation, the reason is that high-interest debt becomes more expensive when inflation rises, Stroup said.
“So paying down credit card balances, loans and other high-interest debt can help reduce the impact of inflation on your finances. It also frees up more of your income for other uses rather than servicing debt,” he said.
On that same note, if you have a variable interest rate on any loan or debt, you may end up spending more if interest rates rise, according to Erika Kullberg, founder of Erika.com, an attorney and personal finance expert.
“Create a debt repayment plan that focuses on making extra debt payments on the highest interest form of debt,” she said. This is known as the avalanche debt repayment method. “Once you pay off the most expensive debt in full, you put all that money each month towards the next highest payment. The less you spend on interest, the easier it becomes to pay off your debt faster.”
High-Yield Savings or CDs
If you’re saving money instead of investing it, then giving your savings a chance to grow in a high-yield savings or CD is the best way to work towards outpacing inflation, Kullberg said.
“The longer your cash sits uninvested, the less it becomes worth due to inflation. You need to keep that money growing so you gain value, not lose it,” she said.
Mindful Shopping
While you might already be good at budgeting, Kullberg recommended that everyone can benefit from some mindfulness while shopping. This can look like “pausing before buying and really thinking critically about every purchase you make,” she said.
She added, “Think before you spend. It’s as easy as asking yourself a few quick illuminating questions. Do I need this or just want it? Can this purchase wait? Why do I feel an urge to buy it? What could that money go to instead?” Oftentimes, pausing to ask yourself these questions deters unnecessary purchases.
Consumers should also buy in bulk, take advantage of sales, and use loyalty programs, according to Jake Falcon, founder and CEO, of Falcon Wealth Advisors.
Reduce Energy Consumption
Additionally, reducing energy consumption and carpooling can help lower gas expenses, Falcon pointed out.
“The key here is to pay attention to your food and energy consumption, maybe now is a great time to cut back unnecessary excesses,” he said.
Pay Off Mortgage Early
If you have a mortgage, working to pay it off early means minimizing everything from monthly outflow to mortgage interest.
“Spending less on interest can help [consumers] cope with rising costs over the long term,” Kullberg said.
If you’re renting, prioritize only renting a home you can afford, she said. “Work toward keeping housing spending below 30% of your gross monthly income so you still have enough money left over to focus on your financial goals and living comfortably.”
Refinance a Mortgage or Negotiate a Better Lease
If there’s little chance of paying off your mortgage early, consider refinancing it to secure a lower interest rate or by locking in a fixed-rate mortgage, according to Falcon.
Renters can try to negotiate longer lease terms to lock in current rental rates and avoid potential increases, he added. “Obviously, rates are much higher than [they] were a few years ago.”
Better Financial Habits
Developing long-term financial habits such as regular investing, maintaining an emergency fund and living within one’s means can help individuals stay ahead of inflation overall, Falcon said.
More From GOBankingRates
