Lessen the Effects of Inflation During Tough Times

Written by: CashAdvice Staff

Anyone who has read a newspaper or has a TV knows what inflation is, but do you know how much impact it has on the money you’re able to spend and what you can do about lessening its effects on you. Below are some topics that will help you to have a better understanding of inflation and what to do during that period.

First what inflation is? Inflation is a measurement used to gauge the rise in prices of commodities and services. Inflation can affect just about anything, such as the price of a new home, food, utilities, medicine, your job, retirement, and more. We will take these subjects and examine the way inflation affects each of them. 

But for now, know that when inflation increases its presence in a community, the consumers and those who sell a service feel its pinch. For example, food prices start to rise because of inflation, which can lead to harmful effects on the population. Other harmful aspects include the decrease of your money when you’re paying more for the same amount of food because of an increase in inflation. 

New homes during inflation. 39 years ago, middle-class Americans would expect to pay around 76,000 dollars for a new home. In 2011 the price of a new home went up to 139,000 that price has risen to 219,300 by 2018, according to the NAR. So what happened? One word. Inflation. Inflation is like a snake in the grass. You may not know it’s there until it is right in front of you. Many of us don’t even feel the effects of inflation until it’s full-blown. 

Unfortunately, once it takes hold, the effect can be painful. Let’s say you decided to buy a starter home. The price of your new house costs more because of a rise in inflation, and the price will be even more dependent on the level of inflation. Not all it’s bad news the value of your house increases more during this time, but so does your payments. 

Fast-food chains and restaurants. Ever since the beginning of the 21-century food prices has increased. However, consumers are not the only ones who feel the pinch when it comes to higher prices due to inflation, those dealing in the food industry like restaurants, McDonald, and Burger King, Wendy’s all suffered. As a rule, people tend to cut back and eat more at home to save money during inflation. Higher inflation means less money to splurge on things like eating out.

The effect on utilities. Inflation not only affects your food, and mortgage but your utilities. The good news here is unlike other products rising because of inflation, utilities haven’t had too much of an increase. This is due to the government’s influence on how much monopoly companies can charge. Nevertheless, inflation does play a part in the increase, and according to one source energy bills have been rising since 2014.

Medicine. Since the cost of products that goes into the medicine increases, those in the over the counter drug-making business will pass that cost to you. According to one source over 104 brands of medicine rose to 13.1 percent while CBS reported that 3,400 drugs increase prices within six months of the year 2019 with a rate of 17 percent. 

Many people depend on their medicines, but with the cost going up, they may not be able to afford it. For example, for those who have type 1 diabetes, insulin has doubled in only five years. Inflation is not the only culprit driving the price of drugs increase, but it certainly plays a factor here as well. 

Your job. Not all inflation is bad. Let say inflation has reached only a mild level. People are still spending even though prices have increased slightly, which means that factories and industries are making the same or more products for the consumer. Furthermore, the Federal Reserve arranges a certain level of inflation to keep the economy healthy. Still, if inflation goes higher, then the consumer spends less which brings about a reduction of productions being sold. Less money in consumers’ pockets means less spending power. Companies will then have to make cuts of their own including the loss of jobs.

Retirement. Yes, inflation affects your retirement because inflation weakens currency, and you will have to save more money to retire. If you want to have the same value of life as you did when working, you will have to utilize the money you do have with investments.  

Depending on what type of investment you have your money during inflation may be earning less. Bank bonds tend to show poorer performance during times of inflation. Stocks, on the other hand, may have different results. Factors must include how strong a company is doing. A healthy company even during inflation may still have a positive effect on how much your stocks are worth. Also, gold tends to do well especially when inflation rises. 

Even though inflation will always come and go, if you remain aware and plan, the result will have less of a burden on you and your family. You can start with investing in stocks or real estate, buy government-backed bonds or better known as treasury inflation-protected securities, protect your savings by making sure you’re getting the best bank rate, and lastly beware of your spending. Reduce your debt, including paying off credit cards and loans, will give you more money to add to your savings.


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Lessen the Effects of Inflation During Tough Times

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