5 Tips for Managing High Inflation and Protecting Your Financial Wellbeing
High inflation can be a major concern for individuals and families trying to manage their finances. It can lead to higher costs for necessities like food and housing, and can make it difficult for wages to keep up with the rising cost of living. If you're dealing with high inflation, there are several issues you should consider in order to protect your financial wellbeing.
First, it's important to assess how your personal expenses may have changed relative to the general cost of inflation. This may mean updating your emergency funds to ensure that you have enough money set aside to cover unexpected expenses. You should also look for ways to save money on necessary expenses, such as electing annual payments instead of monthly ones or buying staple goods in bulk. Additionally, consider temporarily reducing or delaying certain unnecessary expenses in order to alleviate stress on your cash flow.
If you have any important upcoming purchases that may be subject to price increases, it may be worth considering accelerating those purchases in order to lock in a lower price. If you're working, it's also a good idea to consider ways to increase your income, such as asking for a raise, changing jobs, or developing new skills. If you're retired, it's important to be mindful of the impact of high inflation on your retirement income. Social Security benefits have a built-in cost of living adjustment (COLA) that can help offset the effects of inflation, so consider delaying your benefits in order to increase your overall income and the level of income that is subject to a COLA.
Another issue to consider when dealing with high inflation is your asset allocations. A high fixed-income allocation can be particularly risky during times of high inflation, so it may be worth maintaining or increasing your exposure to equities and other asset classes that may be better positioned to keep up with inflation. If you're concerned about your fixed-income portfolio's ability to manage the effects of high inflation, you may want to consider purchasing inflation-hedged assets such as Series I Savings Bonds, Treasury Inflation-Protected Securities, or CDs.
Finally, it's important to be aware of the potential impact of high inflation on your long-term financial goals. This may mean reviewing your retirement plans or other financial goals and adjusting them as needed to account for the effects of high inflation. By taking the time to consider these issues, you can better protect your financial wellbeing in the face of high inflation.
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