With inflation raging, there’s no better time than now to think about ways to protect yourself and your money. While there’s no “best approach” to protecting against inflation, there are tips you should at least consider.
Here are five tips for pointing you in the right direction:
1. Review your budget
Before you do anything else, review your budget. Do you feel good about your income and expenses? Are there areas of concern?
Be honest with yourself when reviewing your budget. It’s the information you gather during this step that will impact what you do in the future to protect against inflation.
2. Don’t go “all in” on cash
It’s easy to get scared when inflation is on the rise, but don’t let that stop you from properly investing your money. Rather than go all in on cash, look for other ideas that make more sense. For example, investing in precious metals — such as gold and silver — is always a popular choice when inflation is on the rise.
3. Take a closer look at your emergency fund
Inflation can take a toll on your finances, so it’s nice to have a cushion to fall back on if necessary. Review your emergency fund with the idea of answering this one question: how many months will the money last if you have no income?
If possible, keep a minimum of three to six months’ savings in an emergency bank account. This will give you comfort when inflation is on the rise.
4. Diversify your investments
It’s good to keep things simple when creating an action plan for protecting against inflation. However, don’t shy away from diversifying your investments. As noted above, you don’t want to go all in on cash.
5. Take a step back on spending
With inflation on the rise, you’re paying more money on everyday items like groceries, gas, and consumer goods. And for that reason, if you don’t tone back your spending, you’ll find yourself quickly working through your income and savings.
This goes hand in hand with reviewing your budget. A solid understanding of your budget allows you to decide how much you can afford to spend on each category — such as housing, food, and entertainment — every month.
Answer these questions
What do you think about these five tips for protecting against inflation? Have you already implemented one or more of these into your daily life? Would you add any other tips to the list?