The rising global inflation rate has seeped into many budgets and significantly influenced the prices of products and services. U.S. inflation hit a 40-year high last year, raising costs for groceries, gas, and other essentials. A Pew Research Center survey found that inflation is a top concern for seven-in-ten Americans. High inflation rates may reduce your purchasing power and affect your living standing, so how can you protect your finances?
You will notice that your income doesn’t go as far as it used to during an inflation surge. But the good news is you can take the following steps to protect your finances during these challenging economic times.
Open a High-Yield Savings Account
If you have money saved in a checking or basic savings account, the chances are that the value of the money is not going up. Opening a high-yield savings account and transferring your money will offer you a higher interest rate and allow you to make money by simply saving.
A high-yield savings account is typically offered by a bank or credit union and provides higher interest rates than the national average of traditional savings accounts. You can store money that you would have otherwise saved into a regular savings account for various expenses, such as an emergency fund, a down payment for a home, or a vacation.
Invest in the Stock Market
Rising inflation rates reduce the value of your money over time, so it can be beneficial to invest money and allow it to grow. However, the stock market can fluctuate, so it’s important to be strategic about where and how much you invest. Historically, the stock market has always recovered from a crash, so most long-term investors are usually prepared for a rebound.
The key to safely investing is knowing what to avoid when the stock market drops. This typically involves understanding your risk tolerance, preparing for losses, and focusing on the long term. The last thing you want to do is enter the stock market without knowing the steps to take to avoid significant losses.
Avoid Withdrawing Emergency Funds
When inflation starts seeping into your budget or reducing your purchasing power, it can be tempting to withdraw money from your emergency funds. But what will you do when you encounter an emergency, such as job loss or a sudden need to repair your home or car? It’s important to save your emergency funds for days that may require you to spend money unexpectedly.
Consider taking an installment loan to pay your bills and deal with an inflation surge. Choose a reputable platform like FlexMoney to learn more about your borrowing options and determine if the loan fits your current financial situation. You should also consider your affordability and create a timeline for repayment before taking the loan. The last thing you want is another financial burden, but the key benefit of an installment loan is that it offers financial relief when you need it most. And it also prevents you from touching your emergency funds, ensuring you have money saved up for the future.
Look for Additional Income Streams
When prices for basic commodities are high, and your income isn’t enough, it may be time to look for an additional income stream. You can pick up a side hustle, monetize on a skill, or start a business to combat an inflation surge. An additional income stream will help you maintain your standard of living and may also help you add funds to your savings accounts.
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