With the high cost of commodities, it’s apparent that inflation is here. Economists define inflation as a situation where too much money is chasing too few goods and services. There are a number of situations that can cause inflation including an increase in public spending, deficit financing of government spending, hoarding, and disruption in international trade among others.
There’s no cause for alarm though. Hard economic times can feel like the end of the world, but it’s not. It’s just a moment that will come to pass. Unfortunately, there’s nothing much you can do except learning how to survive it. This is the time to re-evaluate your finances and know what you need to cut down so that you can make do with what you have. Here are some tips on how to survive inflation.
Cut Costs
You may notice that you’re spending almost double what you used to before the inflation. When you go to the supermarket, basic commodities like cooking oil, flour, bread, and milk have shot up in prices. Most of us are not prepared or capable of spending that extra coin on shopping. Therefore, you may have to cut down on excessive spending to remain afloat. Make a list of the essential things you need and non-essentials then prioritize purchasing the essentials. If you need to purchase pricey items, take advantage of sales and customer discounts.
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Make A New Budget
Inflation doesn’t go away overnight. It can last for years so it’s best to make a budget based on the current financial situation. This ensures that you’re only spending what you make regardless of the cost of things. You can make adjustments to your budget but avoid dipping into the emergency fund or savings unless it’s absolutely necessary.
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Grow Investments Than Savings
During a financial crisis, our natural instinct is to put money in our savings account for a rainy day. However, financial experts urge against it. Money in a savings account makes little to no interest due to low-interest rates during inflation. The best way to grow your money is to invest it in investments that will increase during this time. Some of the best investments include bonds and stocks. Focus on companies that withstand the rising input costs to customers, such as those in the consumer staples sector. Here’s a guide on How To Invest During Inflationary Times.
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Invest In Yourself
Job losses are one of the effects of inflation. As mentioned, companies suffer financially during this period and may choose to reduce the number of employees to a manageable number. Whether you’ve suffered from job loss or you’re still employed, it’s absolutely necessary to increase your value in the job market. According to Warren Buffet, investing in your own talent is one of the best ways to maintain your purchasing power over time. Learn a new skill so you can increase your value to your employer.
Ask For A Raise
Fuel prices have gone up which means it will cost you more to make your daily commute to work. For that reason, you should negotiate with your company for a salary increase if you feel like your current salary will not be enough to sustain your typical spending. You can also suggest other options that might help you reduce expenses such as working from home. Remember that companies are also feeling the pinch of inflation so asking for a raise should only happen if it’s completely necessary. 6 signs You Need A Pay Raise
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Refinance Your Debt
Being in debt during inflation can be a nightmare but you can mitigate the burden of paying the loan by refinancing it. In this situation, a person will settle the old debt by taking a new debt with favourable conditions. The favourable condition may include a longer payment period or low-interest rates. However, this also means taking a second loan on an asset like a house or a car. Finances: Borrowing In Joy But Payback In Sorrow – Why You Need To Work On Clearing Your Debts
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Don’t Panic
The worst thing you can do during tough times is to panic. Panic impairs your judgment causing you to make poor decisions that may end up costing you more. Stay calm and take your time to think things through. Talk to people you trust and let them know how you’re feeling. Remind yourself that you have the resources to survive this challenge and if worse comes to worst, you have a support system that is ready to assist you in whichever way they can.
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