4 Ways to Prepare Your Money for Months or Years of High Inflation

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When it comes to the personal finance space, inflation is on many people’s minds. That’s not lost on financial planner Anjali Jariwala.

“When inflation first started at the 7% or 8% that we’re seeing now, a lot of us thought it was temporary because we had a lot of stimulus money, things were starting to reopen and a lot of people were spending more,” he told Insider. “That boosted supply and put pressure on inflation.”

Unfortunately, Jariwala said, experts agree that it now seems much more likely that inflation is here to stay for the foreseeable future.

“The Fed is going to try to fight inflation with interest rates, raises, etc., but we really don’t know what’s going to happen,” he said.

So what can the average person do to prepare for high inflation and ensure a bright financial future? Jariwala suggests doing the following four things to stay afloat during uncertain times.

1. Adjust your daily spending habits

Jariwala said saving enough money is really important right now because everything costs more and prices will continue to rise. The best way to do this is by making adjustments to your daily spending and trying to cut back where you can.

She said that by cutting expenses, you’ll have “a little more protection on your cash, which makes it a little easier and less stressful to manage on a monthly basis.”

There are many ways to spend less, but some ways other people have found success include eating less, canceling unnecessary subscriptions, and trying “no spending” days or weeks.

2. Fatten up your emergency fund

Jariwala said that when the COVID-19 pandemic started, he told his customers, “Cash is king.”

“I think it’s a bit of a similar feeling right now because we don’t know exactly what’s going to happen,” Jariwala said.

Having an emergency fund is important even in the best of times because personal disasters can strike at unexpected times for anyone.

Now, during a time of high inflation, large-scale international conflicts, and volatile markets, it’s more important than ever to make sure you have enough in reserve for the rainy days.

There are many ways to save more; two popular ones include paying yourself first and automating your savings.

3. Look for cheaper, rent-stabilized housing

Home values ​​and rents are rising everywhere, with some areas being hit harder than others. Jariwala said that in his home state of California, rents in certain markets have suddenly increased by 30% to 50%.

Because of this, she strongly recommends that people start prioritizing rent-stabilized units in their search, which will make their year-over-year housing costs much more manageable over time.

Jariwala also cited the rise of work-from-home setups as a perfect opportunity to ditch expensive real estate markets for more affordable ones.

4. Readjust your retirement calculations

If you’re thinking a bit more long-term and wondering how inflation might affect your retirement plans, Jariwala said the most important thing to look at is your current spending levels and how much you’ll need to afford the lifestyle you want. in retirement.

“When I plan retirement [with clients]the way I do it is on a cash-flow basis,” Jariwala said. “Since it’s cash-based, inflation has an impact because inflation is significantly higher.”

He said that when he calculates for his clients how much they will need in retirement, he uses a 2.5% inflation rate adjustment to determine exactly how much they are likely to need.

“I have to think about whether 2.5% is still a good inflation adjustment to use for the foreseeable future,” he said. “I don’t anticipate that inflation will be at these levels forever, but I don’t know how long it will be.”

Adjusting your calculations for inflation may require you to save more each month or delay retirement a few years. But knowing what to do ahead of time can set you up for a smoother retirement in an uncertain future.

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