During times of higher inflation, you likely notice that the price of everything - from a cup of coffee to a new car - gets more expensive. This can be especially burdensome for consumers when their income fails to keep up with rising prices. Even worse, your investments can be at risk as well. Therefore, consumers have to take extra steps to get the most out of their money, as well as protect its value. Otherwise, you risk losing a significant amount of purchasing power and net worth.
Here are three financially savvy tips to help ease the burden of higher inflation, so that you can save money and preserve your purchasing power:
Try negotiating lower prices on your recurring expenses
One of the most effective strategies to combat rising prices is to negotiate better deals on nearly everything that you purchase - especially recurring expenses. You can begin by building a rapport with the companies that you do business with. Then, ask about any potential discounts or customer loyalty programs that can save you money. It doesn't hurt to at least ask.
Here are some common recurring expenses that you can often negotiate lower prices on:
- Cable bills
- Cell phone plans
- Gym memberships
- Insurance premiums
- Internet service plans
- Streaming services
When consumers call about getting a lower rate, they are almost always successful at shaving some money off their monthly bills. If you find that a company isn't willing to reduce its price, consider doing business with another company that can give you a better deal.
Delay big-ticket purchases
Inflation tends to hit consumer goods and services in cycles. For example, there might be certain times when home prices soar due to higher construction costs - or vehicles become a lot more expensive when auto makers are unable to keep up with demand. Sudden price hikes are often just temporary while the market re-adjusts to new supply and demand constraints.
Therefore, you might be better off delaying big-ticket purchases until prices ease off a bit. For instance, if higher inflation is causing vehicle prices to surge and your current car is still in good driving condition, then you should wait to replace your vehicle until you can get a better deal. The same is true of housing bubbles. If you can wait to purchase a home after housing prices decline, you can save a lot of money.
Diversify your investment portfolio
Another consideration to make is preserving your future purchasing power by protecting the value of your investments. For example, certain asset classes - like long-term bonds and low-yield money market funds - can see their value erode due to inflation.
That is why your portfolio needs to contain a diverse mix of investments that outperform the above-mentioned asset classes during periods of higher inflation:
- Commodities
- Equities
- Treasury Inflation-Protected Securities (TIPS)
If you have any questions about how to protect the purchasing power of your portfolio, contact a financial advisor to help you devise a good investing strategy for your investments.
In short, combating higher inflation requires being proactive in identifying opportunities to save money, as well as preserving its purchasing power. Don't be afraid to negotiate better deals on your recurring expenses to help offset rising prices elsewhere in the economy. If you can wait to make a big-ticket purchase, then doing so can help you save money as well. A well-diversified portfolio that contains asset classes that typically outperform other asset classes during periods of rising inflation will help protect the future purchasing power of your investments.
