Inflation Is On The Rise: Here's How You Can Prepare Your Finances

Real income in the U.S. is now 3% below its pre-COVID trend.

Despite nominal wage growth, real wages at 2% are the weakest since the 2009.

(Real wage growth is the nominal growth rate subtracted by the inflation rate)

The COVID-19 Pandemic caused a tremendous amount of upheaval.

To deal with this, state and federal governments invested a lot of money into the economy.

The unfortunate side-effect of this is inflation.

Here are some ways to prepare your financial health against inflation: 
 

1. Stockpile on Necessities

One of the biggest issues during high inflation: rising cost of basic, everyday necessities.

Everything from food to toiletries becomes more expensive.

A solution to this: buy up, buy in bulk. 

Stock up on non-perishable items that you know you'll need in the future. This includes staples like:

• flour
• pasta
• rice
• canned goods
• toilet paper
• toothpaste

When bought ahead of inflated prices, you'll save hundreds to thousands of dollars on things you use on a daily basis.
 

2. Consider Investing in Commodities and/or Real Estate

Commodities — basic material goods used to produce other goods (raw materials) — also rise in price during inflation.

This is because businesses can't keep up with customer demands.

To meet customer needs, production is ramped up, which leads to the rise in the cost of raw materials. 

This makes investing in commodities a good investment strategy when inflation is increasing.

The most common way is to purchase stock in a company that specializes in commodity extraction, distribution, or trading.
 

3. Strategize When It Comes to Debt

Inflation can have both a positive and negative effect on your ability to pay back your debts, depending on what form the debt takes.

Loans that are locked into specific rates will benefit tremendously from inflation. Effectively, the debt will be less than what it was originally.

If you're in a position where you might need to go into debt sometime in the future, take out a fixed-rate loan before inflation starts to balloon.

This could lower your repayment in the long-run.

Conversely, loans that have variable interest rates can be incredibly hazardous.

Taking out one of these when inflation is increasing would be a terrible idea.
 

4. Develop Different Income Streams

Given how many unknown factors exist when inflation is in play, it's a really good idea to develop multiple income streams.

If you're currently employed at a company or self-employed on a platform, now's the time to consider creating an additional side business or two.

Supplement your income.

This helps deal with affording rising prices, but it's especially important to do as the company you work for might go under.

With a few extra income streams at our disposal, you'll be able to better handle what life throws at you.
 

Finding Ways to Handle Inflation

Inflation isn't bad in all respects, but the reality is that it makes doing pretty much everything more difficult.

It:

• changes your financial investments drastically
• increases the prices you have to pay
• can easily put your job at risk

Finding ways to deal with the effects of inflation is incredibly important.

Not doing so could possibly put you in an incredibly dire situation, so be prepared if at all possible.