How Will People Transform Their Lives With So Many Obstacles to Financial Recovery?
Getting the most out of your career, your investments and your finances didn’t become any less important during the pandemic — but it did become a whole lot harder. The labor market has undergone a permanent transformation, rising inflation continues to make just about everything more expensive and stark political lines continue to define issues like vaccine mandates.
So, how do people improve their life, health and wealth under such trying circumstances with so many obstacles? GOBankingRates asked the experts.
Inflation Is Here To Stay — Invest Accordingly
From the gas station to the grocery store, rising prices have defined the 2021 economy — and few experts predict it will get better before it gets worse.
“Inflation is coming to a degree that we haven’t seen since 1979-80,” said author, historian and political scientist William S. Bike of Central Park Communications.
Inflation doesn’t only beat up your checking account. Rising prices equal diminishing returns on your investments.
“If you make a 5% return on an investment, then you’re not doing too poorly, all things remaining the same,” said Nate Tsang, founder and CEO of WallStreetZen. “But if there’s 5.5% inflation, like we’ve seen, you actually lost money.”
When money is losing value, invest in things you can see and touch.
“One of the best investments people can make during a time of inflation is in real estate,” Bike said. “Commodities and tangible assets such as gold, oil, cotton, soybeans, and orange juice are good because their prices move with inflation.”
Tsang agreed with the wisdom of both commodities and real estate, but he also recommends inflation-indexed bonds.
“These instruments allow the principal to rise with inflation — and decrease with deflation — meaning you’re safe when prices rise on the Consumer Price Index, as they have been for the past year,” Tsang said.
Finally, stocks that pay their shareholders can serve as a hedge when the value of the dollar declines.
“Investing in dividend stocks can be a way to protect yourself against inflation,” said Ben Reynolds, CEO and founder of Sure Dividend. “However, the key is targeting dividend stocks that will grow during the inflation surge because as these companies prosper, shareholders can reap the rewards via higher dividends.”
Keep Your Credit Card Tucked Away at the Gas Station
Gas is at the heart of the inflation crisis, but the pump happens to be one place where you can often save pennies that eventually become dollars.
“Buy gas with cash,” said Jeff Zhou, a personal finance expert and co-founder of Fig Loans. “Some gas stations will charge 10-20 cents more per gallon if you buy with a credit card. While that seems like a small amount, it can really add up over the course of time.”
Discover: 40 Money Habits That Can Leave You Broke
Reconsider Recurring Expenses
Another slow, steady financial bleed comes from subscriptions and other recurring purchases, which are so easy to ignore.
“Take the time to review any recurring charges on your credit cards,” said Clay Ernst, executive director of financial planning at Edelman Financial Engines. “While many are small fees — like $8.99 a month for a streaming service — you may realize you are not using these services often enough to justify the monthly expense. You can also seek out package or family deals on expenses like this to minimize these monthly costs, like bundling Hulu with a free Spotify subscription.”
Rethink Your Credit Card Rewards
You might be conditioned to use your credit cards the way you did before the pandemic, but times — and your financial needs — have changed.
“One easy way to chip away at the impact of today’s higher inflation is to use cash-back credit cards instead of points cards,” Ernst said. “There are many credit cards available today that offer 2%-3% cash back on everyday purchases, with some offering as much as 6% cash back on certain purchase categories like groceries. With the pandemic impacting everyone’s travel plans these days, and airlines offering discounted airfares to fill seats, points offer significantly less value for many consumers.”
Find Out: 50 Ways You’re Throwing Money Away
As Good as New Can Be Good Enough
The holiday season is coming, and this year, you’d be wise to lower those shopping bills by cutting a few corners on big purchases.
“Many online retailers — like Apple and Amazon — have ‘certified refurbished’ sections on their websites where you can purchase ‘like new’ products for 10%-40% discounts,” Ernst said. “Every year, thousands of brand-new products get returned to online retailers for reasons ranging from the wrong color to incorrect size. These products are often immediately repackaged and made available at heavily discounted prices, and most importantly, come with the same warranty as the original new product.”
Never Stop Paying Yourself First
When money is tight, you have to tighten your belt. Cut out Starbucks. Cut out Netflix. Cut out merlot. But no matter how bad things get, treat saving and investing the way you treat rent and utilities — bills that must be paid no matter what.
“Keep on investing through sunny and stormy weather,” said G. Brian Davis of SparkRental.com. “Invest what you can spare, even if it’s only $20 a month.”
Looking For Work? Use the Great Resignation to Your Advantage
The Great Resignation has forced employers across the economy to use imaginative perks to lure talent. Take advantage of the moment.
“The pandemic has led to a newfound appreciation of workplace benefits,” said Rob Grubka, CEO of health solutions for Voya Financial. “In fact, new Voya research reveals that the majority of employed individuals — 68% — expect their workplace benefits to play a more critical role in their future job selection. This finding comes at a time when a number of Americans are voluntarily changing jobs, often referred to as the ‘Great Resignation,’ as employers focus their efforts on attracting and retaining top talent.”
You could, of course, always just go for more money instead.
“Ask for a raise,” said Wendy Barlin of About Profit. “Many employers are working hard to keep good people during this Great resignation.”
Stick With the Fundamentals
Pandemic or no pandemic, you’d always be wise to save your pennies, avoid toxic debt, use credit cards responsibly and curtail unnecessary spending — you know, all the stuff that is easy to say and hard to do.
“Save like a maniac — at least 15% of your gross pay,” said Olivia Tan, personal finance coach and the co-founder of CocoFax. “Avoid debt like the plague. Adopt the following philosophy: If I can’t pay cash for something, I can’t afford it. Consistent with that, pay your credit card off in full every month — no amount of frequent-flier points or cash back is worth paying 18%-20% interest. Understand the difference between needs and wants. Buy your needs, and only the wants you can afford.”
Finally, remember that there’s one purchase that almost always pays for itself — professional help.
“Every person’s financial situation is unique, so meeting with a financial advisor can be incredibly beneficial,” said Carter Seuthe, CEO of Credit Summit. “With all of the uncertainties going on right now, now is probably the best time ever to meet with an advisor.”
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Last updated: Oct. 25, 2021