Although the Federal Reserve Bank (FED) claims that inflation will afford us some relief from its effects by lowering prices in the coming months, the truth is that increasing costs of goods and services will continue to have a devastating effect on most people’s income. This affects savings rates which would otherwise be invested for future use – instead these funds are going towards present-day living expenses. To combat this problem, we’ll look at five strategies for individuals to take charge of their own destiny when fighting against inflation; no matter what government officials may say or do.
This will serve as a compilation of ideas, arguments, and concepts that can begin being implemented today to stave off the negative consequences created by this all-encompassing yet silent enemy known as inflation.
1) Plan your first-need purchases
Accumulating a stockpile of non-perishable food (so long as the expiration date is far away in time) and cleaners and personal hygiene items seems like a good idea given the current context, where prices update monthly. For this you need space at home for storage and to plan out what will go into this category. In wholesale markets there are savings of up to 30% when compared to an identical item sold at retail stores. Plus add the savings from buying before price updates, and these total savings can sometimes top 50%. It’s definitely worth investing energy into such a strategy because it pays off economically – providing you spend enough time planning and executing your purchase order plans.
2) Invest in index instruments
Index funds are a less expensive way to mirror the market. Index funds usually carry less management fees than the traditional investment vehicles such as mutual funds do.
There are many different options for index investing, including international and bond index investing. Exchange-traded products (ETPs) function in a similar manner to index funds but trade on exchanges like stocks instead of through brokerages. These ETPs react to changes in market price so you can buy or sell them at any time during the day just like any other security. The value of an ETP is determined by its net asset value (NAV). This includes all securities within the fund and evaluates performance based on this factor. Because these investment tools aim to mimic what happens in the marketplace or within one specific industry, they require very little management time – which makes them perfect for busy people who want diversified assets without paying high fees associated with some investments.
3) Always buy with reference prices
If everyone applied the price update mechanism seen in the previous point, everything would be easier and the war against inflation would not have to be personal, but rather a group one, increasing its chances of victory.
Unfortunately, the desire of many companies, businesses and freelancers to increase profit margins by increasing prices, sometimes well above inflation, complicates the picture and contributes to the price spiral not stopping and even accelerating.
The best way to combat these actors on the battlefield who, in the middle of the troubled river, end up taking advantage of inflation is not to validate that strategy with our purchases, which is nothing more than a fueled one.
To do this, we must spend time looking for the reference prices of the product we want to buy (today with the cell phone at hand we can do it in a minute) and not pay an extra peso.
4) Don’t use your cash, invest it and take a loan lower than inflation
Mortgages and loans for investment properties—such as a non-owner-occupied mortgage—are much more stringent than those for personal homes.
If you have a home mortgage, you may know that many home mortgage lenders no longer require 20% down payments to get a loan. But this isn’t always the case when it comes to mortgages for investment properties – because there are greater risks of foreclosure and default in these cases. With most fixed-rate mortgages, lenders will require at least 15% down payment with 680+ credit score when applying for one unit investment property. Your credit score needs to be 620 or higher if applying through Rocket Mortgage® (though it might not be true across all lenders). For two-to-four unit investment properties, 25% down payment is often required (this could vary depending on lender) along with an interest rate over 620 (again, this varies depending on lender).
5) Update the value of your working hour
Those who work for an employer, salary updates are established by the employer, often in negotiations with a union. Therefore, there is not much to do individually in this battlefield.
However, today there is a significant number of entrepreneurs and self-employed who find themselves month after month in the dilemma of updating the price of their products and services at the risk of losing customers or maintaining it and losing real income in the face of inflation.
Clearly, the most appropriate thing would be not to deviate too much from the consumer price index, as long as there is no change in the services or products offered. How often should that update of values take place without going overboard or falling short? It could well be every 6 months following the official inflation data.