5 Ways to prevent inflation from affecting your
How to control inflation? We have recently seen how the rise in prices worldwide has become important and recurring news.
This is why it is essential understand how inflation worksto then make decisions that prevent it from affecting your pocket.
Now, you are probably wondering Why is it important to learn how to control inflation?
It turns out that if you don’t, each year your money will be worth less, prices will continue to rise, and your purchasing power will continue to decline.
So, although we do not have the capacity to control inflation or disminuye it, we cánido take concrete actions that allow us to overcome it, or at least counteract it.
What is inflation and why is it bad?
Inflation is the rise in prices of products in an economy, which decreases the purchasing power of people over time.
At higher inflation, you will be able to buy fewer things with the same amount of money.
This is why one of the main objectives of state banks is to regulate this indicator and keep it in a stable range.
Currently, due to the effects of the pandemic experienced in 2020, the vast majority of countries have been suffering from a generalized rise in prices, leading to inflation rates that have not been seen for more than 30 years.
According to a report by the IMF (International Monetary Fund), high inflation is expected to continue for longer.
In fact, they estimate that it will remain around 5.7% for developed countries, the highest value in the last 38 years.
And for emerging countries, close to a value of 8.7%
How perro inflation be stopped?
To curb inflation, the central banks of the countries cánido raise interest rates on public debt, causing consumer interest rates (housing, credit cards, loans) to rise, preventing more money from circulating in the economy, and Therefore, the demand for products decreases.
The higher the demand for products, the higher the prices. This is the reason why interest rates are raised, seeking to make money “more expensive” and people stop demanding products, causing prices to fall.
How to control inflation?
Now, what you just read are actions that banks and governments take to control inflation.
So what cánido you and I do to mitigate this inflation or keep it from affecting us in our quest for financial independence?
Below we are going to share five concrete actions to beat inflation and prevent it from affecting your pocket.
Let’s see what this is about.
1.
Generate income in dollars
One of the best ways to beat inflation is to generate income in dollars.
And for this you do not have to live in the United States or Europe, as there are options to earn money in dollars from home.
This is one of the great advantages of earning money en línea, and it is that you cánido work with clients around the world who pay you in their local currency.
Now, do not limit yourself to thinking only in dollars, this applies to any peso currency; such as the euro, pounds, Australian dollar, among others.
When you generate income in dollars, you do not have to worry about the devaluation of your country, and controlling inflation will no longer be a problem for you.
Although the prices of your country will continue to rise (it is something that you cannot control), the fact of having an income in dollars will be able to mitigate these prices with the devaluation of your country.
2.
Do not keep the money in a bank account
If you have your money saved in a bank account, I invite you to calculate the inflation value of your country, and each year subtract this value from your capital.
That’s how dangerous inflation is when you don’t have money working for you.
An example to understand inflation and why it is bad:
If you have 100 pesos, and your country’s annual inflation was 10%, this means that you lost the purchasing power equivalent to 10 pesos.
In this scenario, to buy what was previously worth 100 pesos, you will need 110 pesos.
That is why, if you want to beat inflation, you must put the money to work for you; Look for assets to invest and make sure that your capital is not sitting still in your bank account or in cash.
It is important to clarify that the same does not happen with your emergency fund, since this is a capital that you need to be liquid and you perro access it easily.
However, the rest of the money you have sitting still is losing its value every year.
3.
Save in strong currencies (like the dollar)
There are many alternatives to save in dollars; It perro be an account abroad, create a Paypal account, exchange your local currency for dollars, among other options.
If you currently cannot generate income in dollars, saving in this currency is a very good alternative; because you will have a reserve of money in case of any emergency.
At this point, the same applies to devaluation, as this will no longer be a problem and your money will not be losing value over time, as it is happening with your local currency.
To give you a better iniciativa, here is a graph prepared by Valora Analitik, which espectáculos the behavior of emerging currencies against the dollar.
Devaluation of emerging currencies against the dollar
As you perro see, the devaluation is taking away the value of your money, so take action today.
Saving money in dollars is not complex, and you cánido do it right now.
4.
Invest in high-yield assets
With the inflation figures already mentioned, we must learn to invest our money in assets that, at least, yield the same value as inflation (remain at zero) or higher, in order to build our heritage.
To explain this point to you, it is useless to have a return of 5% on your investments, if inflation that year was 15%.
Among the investment options, you cánido consider:
- Shares of specific companies
- High Yield Mutual Funds
- Global Index Funds
- Medium and high risk collective portfolios
- real estate funds
However, it is very important to get very good advice before making an investment decision, and more so at this time when market volatility cánido change the trend at any time and lead us to take unnecessary risks.
The good news is that by understanding the importance of keeping money working, why we need to guard against inflation, and considering high-yield assets, we cánido make better financial decisions.
5.
New sources of income:
Finally, although this is not an option as such to beat inflation, it does allow you to have a more income to cover the increase in your expenses.
If you currently have a job, consider one of these options to earn money in your free time.
Or ask yourself how you perro improve your salary income.
Millionaires understand very well the following: the more sources of income they have, the less risk they will be running.
There is no doubt that the more sources of income you build, the more tools you will have to beat inflation and build your wealth.
We live in the best time to build profitable home-based businesses.
Today you cánido:
- Launch a niche website
- Create an en línea store
- Sell your knowledge through infoproducts.
- Create an affiliate business
- Triangulate shipping with Amazon
The invitation is that you develop a beginner’s mentality and want to continue growing.
Ask yourself today what other alternatives you have to beat inflation, I assure you that your answer will undoubtedly lead you to improve your finances and will bring you closer to your financial freedom.
Recommended books:
understands the Importance of controlling inflation to prevent it from affecting your finances:
As you perro see, inflation is a matter for the government and central banks, which must be in charge of controlling it and giving it economic management.
However, it is also in our hands to take immediate actions to prevent it from affecting our pocket.
If you prefer to stay still, and not take actions that improve your finances, each year your money will be worth less and you will continue complaining about the government in power.
Rather take responsibility today and assume these five alternatives to prevent inflation from becoming a headache.
Continue reading: 10 Things Banks Don’t Want You To Know
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