How Inflation Impacts Your Purse

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recession-impacts-4050225 Inflation rates are rising around the globe and governments are trying to combat the rise. How does inflation impact your personal finances? Let’s take a closer look at this issue and discuss six ways to protect your money during high inflationary periods.

What’s inflation?

Inflation is when money loses buying power. In other words, it is when you need more money to buy the same stuff. Many attribute inflation to the government practice of printing money. When that happens, more money is physically circulating in the economy, but the fact it was routinely produced, not made, means the value of the currency suffers.

What can do you about it?

Since inflation chips away at the buying power of your currency, it affects every bill you pay. When money is already tight, a trend of inflation makes everything even tougher. It is a manageable issue, though, and something you need to be serious about managing if you want to keep your personal finances in order.
Here are 6 ways you can protect your money during high inflationary periods.

1. Develop a source of side income

Most people have skills or interests that go untapped once they delve into the world of full-time employment. Since your paycheck’s value is always dwindling due to inflation, it could be time to reignite those interests and create a side business. It does not need to be an all-consuming project – just enough to bring in that percentage of your salary that inflation takes away.

2. Ask for a raise

If you have been performing well and you think the place you work has the financial means to provide a raise, do not be coy – ask for one. Most raises barely cover inflation, so by not asking for a raise, you are effectively agreeing to an inflation-influenced pay cut.

3. Reduce areas of heavy spending

Usually, one or two parts of a budget can really do a number on your finances. A swift rise in oil prices, for example, can make your cost of living spike in a short period of time. Isolate those money-draining factors and figure out ways to get around the financial burden. High gas prices may be combated by running all your errands in one effective trip, requesting telecommuting options for work, or arranging carpools where possible.

4. Buy stuff in bulk

Products go up in price during high inflationary periods, so you should stock up on items you use frequently. Get them in bulk and store them away. Doing that for even a few common household products could result in surprising savings.

5. Secure a fixed-rate loan

One area where inflation can help rather than hurt is if you have a low-interest, fixed-rate loan. In the case of mortgages, for most people during times of high inflation, it is a sound plan to refinance to a fixed-rate loan.

6. Slash credit card debit

Credit card payments are notoriously high, especially due to the astronomical rates many credit card companies charge for borrowing money. The last thing you need during austere times is a hefty bill made more expensive due to staggering interest rates. Eliminating credit card debt should be a priority. Even if its influence is subtle every day, over the long term, inflation can seriously undermine your personal finances. During times of high inflation, the effects are more pronounced and the need the manage them more pressing. Fortunately, they are absolutely manageable, and even small steps can help protect your money.

Mahal Kapoor is a member of a network of bloggers who write about upcoming events and shopping offers on behalf of companies such as American Express. Charge cards from American Express, such as The Gold Card, offer superb lifestyle benefits and Membership Rewards points every time you spend with the Card.