How to Protect Your Savings Against Inflation

How to Protect Your Savings Against Inflation

by | Apr 25, 2022 | Articles, blog, For Individuals, Latest News, Newsletter Article, Personal

2 minute read

Over the last year inflation climbed to the highest rate in decades. The combination of supply and labor shortages, hefty amounts of federal aid, ultra-low interest rates, and strong consumer spending sent inflation soaring. With little indication that it will slow anytime soon, Americans are wondering how to safeguard their savings. Read on for ways to best navigate protection from rising inflation.

Reallocate Money into Stocks

Historically, stock market returns have tended to outpace rising prices, so shoot ahead of inflation with long term, equity investments. Here are a few options to think about:

  • Allocate 10% of your portfolio from bonds to equities in order to take advantage of the boost that inflation may provide for the stock market.
  • Buy preferred stocks, which will pay a higher yield than most types of bonds.
  • Invest in utility stocks. These company stocks typically pay steady dividends as the price rises and falls in a rather predictable pattern through economic phases.

Diversify Investments

While it’s always a good idea to keep an easily accessible emergency fund for unforeseen situations, any amount of money that’s intended for more aggressive saving (i.e., funds you don’t intend to access for at least five years) should be put to work through a diversified investment portfolio. Keep in mind that the economic environment is ever changing so your focus should be on long-term goals, but also seek out investments that historically perform well in an inflationary era. Even an average fund is likely to prosper in the the long term, so don’t worry if you’re not an expert stock picker.

Consider Real Estate

Real estate has intrinsic value and yields dependable income through dividends. The demand for real estate is always there no matter the economic climate, and as inflation increases, so do property values. However, if you prefer a liquid asset, think about real estate investment trusts (REITs), which are bought and sold regularly in the markets. These are companies that own and operate portfolios of varying properties, and they typically pay higher yields than bonds. Because their operating costs remain largely unaffected by rising rates, their prices tend to keep steady.

In the Short Term

Sometimes it’s the small or sneaky costs and fees that can eat into your budget, but when inflation is on the rise, there’s no better time to go over them with a fine-tooth comb. Think about the following:

  • Try to lessen or eliminate any fees you pay for credit cards or bank accounts, including late fees, monthly or annual service fees, and ATM fees.
  • Renegotiate cable and cell phone bills, as well as insurance costs. Many times, a better plan or rate is available, but it’s up to you to call and ask.
  • Do you know how many subscriptions you have? Do a subscription audit from time to time and reduce what you can.

How and when you spend your money should never be taken lightly, but especially during periods of inflation, you should be extra contemplative about how you are spending each dollar. Think about the following:

  • Cutting down voluntary spending by even 5% can impact your personal bottom line.
  • If you need to make a major purchase, do so now as prices will likely increase.
  • Be strategic in your shopping. Use coupons, savings apps, and store loyalty programs and membership cards. Buy generic brand products and prescriptions.

 

About the Author

Rob is a CPA and has been in public accounting since 1993 after graduating from Ball State University with a Bachelor of Science degree in accounting. Rob became co-owner of the firm in 2003. Rob provides services to many types of industries; including, manufacturing, trucking, construction, service, and retail.

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