How to protect yourself from inflation
There’s an elephant in the room, or at least, in the economy: inflation. Inflation is blowing up in the headlines, causing many of us to feel a little deflated about their money. So, let’s talk about what inflation is and what you can do about it.
Inflation is simply an increase in prices. Fifty years ago, we saw some crazy inflation rates of around 10 to 12 per cent. This past year, inflation rates clocked in at 7 per cent in the US. That’s not yet in double figures range, but it’s a lot higher than the 1.4 per cent rate the previous year—five times higher if you’re doing the maths at home.
Inflation and your personal finances
Dave Ramsey explains that inflation in the 1970s was caused by monetary policies, and the Fed (Federal Reserve) shrinking and growing the money supply. Today’s inflation, however, is for a completely different reason — it’s the tsunami surge that followed the global pandemic of 2020. Shutting down production created a shortage of almost every kind of good and service worldwide, and that drove up the prices. It’s basic supply and demand.
The good news is this type of inflation won’t last for a long time. Why? Factories will catch up on production, and we’ll have more to buy. On top of that, people have slowed down on their purchases due to prices being so high. Those factors should allow everything to even out sooner rather than later.
Don’t let fear control you
What can you do about it? For starters, stop freaking out and start controlling the controllables. The biggest thing you can control is where your money is going. Enter: budgeting.
Budgeting every month before the month begins is mega important — especially in times of inflation. The margin you may have had in your budget last year has felt so much smaller this year, right? With increased costs to put gas in the car, buy groceries, and eat out, we’re all feeling the financial pinch. Remember: you’re in control of your money.
So, what’s the antidote to all the fear that comes with inflation? Margin. There’s that word again. Margin is space. It’s breathing room. It means there’s money left over at the end of the month, and you don’t have a panic attack when you open your banking app.
Tips to protect against inflation
Let’s talk about some ways you can create margin with your money to fight against the tyranny of inflation. Here’s a simple formula: spend less + make more = margin.
Finding ways to spend less is like a can of Pringles: once you pop, you can’t stop. It’s an addictive money-saving game once you realise there are so many “money leaks” in your budget. Here are some budget hacks to get you started:
• Do a budget audit and look at how you spend every dollar
• Challenge your family to a spending freeze — for a day, a week or even a month
• Eat at home. Go to the grocery store instead of a restaurant
• Look at all your subscriptions. Cancel the ones you don’t use
• Call phone and TV providers to get a better rate — or switch providers
• Cut back on travel. Airfare, gas and lodging add up fast
• Do an insurance check-up. The Ramsey 5-Minute Coverage Check-up tool will get you started
• Get creative with date night and entertainment — without spending tons of money
Second: make more money
Making more is going to take some literal work. You don’t have to side hustle for ever. But you need margin now —especially if you’re paying off debt. Here are some ideas:
• Sell stuff through online platforms, at a garage sale or work
• Flip furniture, appliances, you name it. Buy it cheap, clean it up, take some good photos, write a nice description, and sell it for more than you paid
• Work an on-demand or delivery job for a local business
• Tutor others in things you’re skilled at, like a school subject or instrument
• Do some UX testing. Companies will pay you to test their websites, products and apps
• Babysit, dog sit, or walk dogs
• Clean houses. It can be flexible with your schedule
• Yard work: you just need some basic tools.
• Turn your talent into money — building websites, woodworking, taking photos, hand-lettering, baking or coaching
I just rattled off a bunch of ideas, and I know you can’t do them all. Here’s my challenge: choose two ways you want to save money and two ways you want to make money.
You can beat inflation. You won’t have to do these things your whole life, but the lessons and habits you learn now can change the way you handle money for ever!
• George Kamel is a personal finance expert with a countercultural approach to money. He’s the host of The Fine Print podcast and The EntreLeadership Podcast on the Ramsey Network. Since 2013 George has served at Ramsey Solutions, where his goal is to help people spend less, save more, and avoid consumer traps, so that they can make the most of their money. Follow George on Twitter, Instagram and Facebook or find out more about him online at ramseysolutions.com/personalities