Inflation is one of the biggest problems facing many countries in the world. According to recent research by Statista’, the global inflation rate increased to 7.4% in 2022 compared to 4.71% in 2021. That is 2.69% of the global inflation rate, higher than last year.
Meanwhile, the percentage of the inflation rate in each country differs. For example, the current inflation rate in Nigeria is 20.77%, compared to South Africa, whose current inflation rate is 7.5%.
For a very long time, countries worldwide have struggled with inflation. And this trend doesn't appear to be changing anytime soon. It seems more likely that things will become worse before they get better.
But how does inflation affect you personally, especially when the rate keeps increasing over time?
You see, when the cost of everyday goods like food, gas, housing, and other necessities rises quickly, it can or will have a major effect on your ability to provide for yourself and your family and save for the future.
In this article, I will give you 5 powerful tips to combat inflation and safeguard your financial future. But first, it is important you understand the basics of inflation and its possible causes. This will guide you in your fight against this trending and silent financial killer.
Understanding The Basics Of Inflation
Inflation has a lot to do with money losing its value over time. In simple terms, inflation is a general increase in the prices of goods and services and a fall in the purchasing value of money. This means that the same value of money won’t be able to buy you the same goods or services amid inflation.
For instance, the naira sells at a black market rate of #830 for 1 dollar against the currency’s rate in July. Subsequently, this has led to a hike in the price of goods and services.
Inflation affects the economy, including the daily livelihood (cost of living, the price of food, and other necessities) of every individual in the country.
High inflation can increase a nation's poverty rate and difficulty in individuals' daily living, especially low-income earners. It is a time that a nation can go into bad debt, and the poor can become poorer.
Ideally, inflation hits many people badly because they don't know the causes. And it is very hard to safeguard your financial future against inflation if you don't know the possible causes.
So, let's quickly check the two major causes of inflation.
1. Demand-Pull: This means a sharp increase in demand while the supply remains the same or decreases in an economy.
Inflation occurs when supply cannot meet the growing demand of goods and services. This is commonly described as "too much money chasing too few goods."
2. Cost-Push: Cost-Push is an increase in the production costs of goods and services, which tends to increase consumer prices irrespective of the level of demand in an economy.
When the costs of production increase, probable through natural disasters, wages, or tax; producers have no choice but to increase the prices of goods and services.
5 Tips To Combat Inflation And Safeguard Your Financial Future
Inflation is a silent killer that can cause difficulty in your daily livelihood and destroy your financial future. To avoid a tragedy like this, you need to understand how to combat inflation and safeguard your hard-earned money with these 5 powerful tips.
1. Invest In Yourself
One of the best ways to combat inflation is to invest in yourself. You might wonder how this safeguards your financial future, and here’s how.
Benjamin Franklin said, “An investment in knowledge pays the best interests.” If you equip yourself with quality education relevant skills in today’s economy and business world, you will become valuable to global workforce. You can learn digital skills like blogging, social media influencing, programming, graphics design, data analytics to increase your future earning power.
Other skills include shoemaking, fashion designing, furniture making, agriculture, etc., these are proven income streams that can help you wield against the poverty rate that comes with inflation.
Trust me, investing in yourself is solid inflation-proof that can help you safeguard your financial future.
2. Cut Down Unnecessary Expenses
Unnecessary expenses are a threat to your financial future, and one of the biggest financial mistakes globally. Hence, you should get rid of them as soon as possible. One of the best ways to do this is to create a weekly or monthly budget and stick to it.
For example, if you are the type that loves to eat out, you should learn how to prepare your own meals. This can save up to 20% or more on food costs.
Moreso, cutting down unnecessary expenses like impulse buying can help you save more to shoulder emergency expenses. You can start by putting away part of what you spend on a daily, or you can use a personal finance app to help you track your expenses. This is because emergencies are unavoidable sometimes.
Inflation is not a one-off phenomenon; it can continue for a long period of time. Fortunately, cutting down on non-essential expenses can help you save more and guard your finances against inflation.
3. Create Passive Income Streams
Another way to combat inflation is to create various passive income streams as much as possible. Passive income is money you earn with minimal continuous effort. A common example of this is dividend stocks.
You can invest in real estate, agriculture, startups, stock options and other financial assets that produce cash flow and earn a return. Bonds and fixed deposits are some of the best investments to safeguard your financial future against inflation.
That way, If the prices of goods rise in the market, you can easily meet the demand and have enough savings with you increasing your active income.
4. Invest In Valuable Assets
You’ve probably heard that investing is the fastest way to create wealth, and that is absolutely right. Creating a strong assets portfolio is one of the best ways to safeguard your financial future. When inflation strikes, the secret to thriving is to invest in assets that are difficult to replicate, such as real estate, gold, and silver.
Ideally, assets like real estate and gold are a good hedge against inflation. And the best part is that their worth appreciates over time. Hence, the need to store up your monies in such assets.
By increasing your asset portfolio, you increase your cash flow with minimal efforts and eventually stay afloat when inflation calls.
5. Diversify Your Investments
Remember the age-long adage that says “don’t put all your eggs in one basket?” This also applies to your investment portfolio. Diversifying your investment is a sure-fire way to safeguard combat inflation and safeguard your financial future.
For instance, you can spread your monies in stocks, real estate, gold, agriculture, cryptocurrency, etc. The idea is that the other investments will make up for losses if one fails to provide income. Investing in different markets segments will make you less susceptible to the effects of inflation.
Inflation is an insidious condition. It can be hard to predict and nearly impossible to avoid. Increased inflation rates can cause serious problems for your financial situation, so you need to take steps to protect your savings.
With these 5 powerful tips, you can successfully fend off the effects of inflation and ensure that your savings will continue to grow through the years—no matter what.