How to Minimize the Effects of Inflation

1)    Review Your Investments.

If you work with a financial advisor, now is the time to set up a meeting with them to review your investments. You may need to make some changes to your portfolio due to inflation. A well-diversified portfolio is often the best strategy during times like these. Your financial advisor may suggest other options as well to help minimize both the short and long-term effects on your investments.

2)    Consider Buying vs. Renting.

Today’s economic environment tends to favor buyers. As prices rise, so do home values, typically. This rise in home prices usually results in a by-product of higher rent. That could spell jumps in rental costs for renters once your lease renews. If you’re considering breaking the renting cycle and buying a home, now might be a great time, especially before rates begin to rise.

3)    Consider Prepaid College Plans.

Many states offer prepaid college plans. While each state’s program will vary, the premise is that you can lock in today’s college costs at the current rate. With inflation also comes a likely increase in college tuition, so securing the current tuition rates could mean considerable savings in the future. If you have children who plan on attending college, this is a smart strategy to consider.

4)    Lock in the Lowest Loan Rates.

Many loans, such as auto loans and mortgages, offer fixed-rate options. This means that your loan rate will not increase throughout the life of your loan. So, if you’re considering purchasing a new car or home, now’s the time to do it before rates start their upward trend.

If you currently have variable-rate loans, such as an Adjustable-Rate Mortgage, switching to a fixed rate should help you lower your interest rate costs well into the future. It also may be an excellent time to review your current auto or home loans rates to see if you could save money by refinancing to a lower rate. This could mean significant savings not only on your monthly payments but over the life of the loan.

5)    Curb Frivolous Spending.

Take time to thoroughly review your budget and past account statements to look for areas to cut. While you don’t have to eliminate all of your fun money, it is wise to be more aware of your spending patterns and look for areas to cut back while consumer costs rise. For example, you may be able to go without Netflix for a while or even lessen your eating-out budget. The point is that even minor cuts can add up to a significant amount of savings each month.

6)    Negotiate Better Deals.

This can be particularly beneficial on monthly subscription expenses such as cable TV, gym memberships, and even insurance premiums. Often you can negotiate a lower price for these services by simply making a phone call. If the option is available, you may want to agree to a longer contract if your price will remain the same throughout the agreement. Doing so will help you avoid future price hikes resulting from inflation.

7)    Consider Postponing Certain Purchases.

Some recent price hikes are a direct result of supply chain bottlenecks or supply shortages. Because of these issues, the costs of certain products have increased substantially. If you see dramatic hikes in the pricing of such items as furniture or even lumber, you may want to hold off on these purchases for a while. These costs will likely come down once the supply chain issues resolve. 

8)    Increase Your Income.

Lastly, with the effects of inflation taking a hit on many people’s wallets, it may be a good idea to consider ways to boost your income. Inflation can often grow faster than the cost-of-living raises from employers – so you want to make sure your income is rising as well. You can look for higher-paying jobs, take on freelance projects, or look into many side hustles available today.

We're Here to Help!

While you may not be able to slow down the rate of inflation, there are steps you can take to help mitigate the effects it has on your finances. You could potentially keep more money in your pocket by making small changes.

If you’re interested in learning more about diversifying your investments or refinancing loans, we’re ready to help. Please stop by any of our convenient branch locations or call (949) 588-9400 today.

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Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.