Home Finance Financial planning in an inflationary environment: what to do to keep your savin

Financial planning in an inflationary environment: what to do to keep your savin

by Jaime Kuhn

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6. Reevaluate Your Budget

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As inflation drives up the cost of everyday goods and services, it’s important to reassess your budget to account for rising prices. Pay close attention to areas where costs have increased, such as groceries, utilities, and fuel, and adjust your spending habits accordingly. Cutting discretionary spending in non-essential categories (like dining out or entertainment) can help you free up more funds for saving and investing, ensuring that you stay on track financially despite inflationary pressures.

7. Focus on Income Growth

Another way to combat inflation is by increasing your income. This might involve asking for a raise, seeking a promotion, or looking for new job opportunities that offer higher pay. Upskilling—developing new skills or earning additional certifications—can also enhance your career prospects and earning potential. Additionally, creating passive income streams, such as starting a side business or investing in dividend-paying stocks, can supplement your regular income and help offset the effects of inflation.

8. Consider Fixed-Rate Debt

While inflation can erode the value of cash, it can also work in your favor if you have fixed-rate debt. During inflationary periods, the real value of fixed debt decreases because you’re paying it back with money that is worth less over time. If you have a mortgage or other fixed-rate loans, you may find that inflation actually makes your debt cheaper in real terms. However, avoid taking on unnecessary debt, especially at variable rates, as interest rates often rise in response to inflation, making those debts more expensive.

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