Inflation has started to hit our wallets. Let’s talk about strategies that work in a high inflation environment.

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SCRIPT
With all the buzz around interest rate hikes, the variant and inflation numbers, volatility is back and we are seeing some crazy moves in the stock market. Last I checked, stocks were ripping on Fed Chief’s commentary
I won’t go into details about what Inflation is. Take a look at my other video where I discuss it in length. Here is a quick summary
Consumer Price Index measures the average change in prices over time that we pay for stuff – cup of coffee, a burger, groceries, or appliances. Inflation is measured in terms of CPI
If you look at the latest number, CPI is up 6.8% on a year over year basis. Basically, on an average you can expect to pay 6.8% more on everyday items and services. No one reason can contribute to why this number is up at an alarming rate.
Fed’s printing of money, lower cost to borrow, strong consumer demand for everything, raising income, and supply chain bottlenecks are a few reasons why this number is up
A high inflation number means a hot economy. Too hot or too slow is not good. It needs to be just right. 2% is the Fed’s magic number. Obviously we are way off from the target
When that happened, Fed starts making adjustments. Two things #1 Tapering, fun term. All it means that Fed is going to scale back all the purchase of treasury bonds and mortgage backed securities
#2 Fed will increase interest rates, how does that work. The idea is to make borrowing expensive. Cost to borrow goes up, business and consumers pull back which limits the money circulation. This typically reduced demand and puts a check on inflation
The question is, what should we do as an investor. You will hear all sorts of comments on what you should do to manage in this environment
To be honest, we all have are own strategies and making quick changes might sound smart but it might not always be practical.
Staying is cash is a bad idea. If you ask me it is always a bad idea but it is the worst idea during an inflationary environment. Think about it, as prices go up, the purchasing power of cash goes down
Inflation is not a reason to not be in stocks. Yes, there will be some noise as the interest rates go up but historically stocks have outperformed during high inflationary periods. Indeed some argue, stocks is a hedge against inflation
If you did nothing and just parked your money in ETF SPY, you will be able to curb any inflation hit
If you are into Bonds, I am not but if you are then TIPS is the way to go. TIPS or Treasury Inflation-Protected Securities are designed to keep up with inflation over time
Investment in physical real estate works. Real estate does well during high inflation periods because as inflation rises so does property values an so does the amount a landlord can charge for rent
If you don’t have the cash or the ability to buy an investment property, you can invest smaller amounts via real estate investment trusts or (REITs)
ETF VNQ is a decent way to invest in REITs. Fundrise is another option to consider
Then there is Gold. GLD is a way to invest in gold. It is an option but I prefer Crypto. It is a matter of time before Bitcoin and Ethereum rule this planet. 4% of my net worth is spread between Bitcoin and Ethereum
I think it is an efficient inflation hedge in this environment. If crypt sounds volatile, maybe you want to do stable coins and make easy 8-10% with little to no risk. More in this video. But that is just my opinion
The idea is the diversify your money in different asset classes. I have a video discussing this topic as well.
Most of my net worth is tied to Real Estate, Stocks and Crypto. Overtime, I would like to increase my exposure to stocks
Having said that real estate has treated my well especially in the last few years where home prices have gone parabolic

DISCLAIMER – I am not a Financial Adviser or Tax Professional, the information provided is my personal opinion and should not be considered professional advice.
#thinkfinance #inflation…(read more)

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Managing Money During High Inflation

Inflation is the sustained increase in the general level of prices for goods and services in an economy over a period of time. When inflation is high, it can have a significant impact on people’s ability to manage their money effectively. As prices rise, the value of money decreases, and individuals and families need to adjust their financial strategies to mitigate the effects of inflation.

Here are some tips for managing money during high inflation:

1. Budgeting and Planning: It is important to create a budget that accounts for the rising prices of goods and services. By tracking expenses and income, individuals can identify areas where they can cut back and allocate more funds to essential items that are experiencing price increases.

2. Saving and Investing: Inflation erodes the purchasing power of money over time, making it essential to save and invest wisely. Individuals should consider investing in assets that are likely to appreciate in value, such as real estate, stocks, and bonds. It is also important to diversify investment portfolios to spread risk and hedge against inflation.

3. Minimize Debt: High inflation can make it more difficult to pay off debts, as the value of money decreases. It is advisable to reduce and eliminate debts as much as possible to avoid paying higher interest rates and accumulating more debt.

4. Seek Increased Income: In order to keep pace with rising prices, individuals may need to seek additional sources of income. This can include taking on a part-time job, freelancing, or starting a side business to supplement their primary income.

5. Shop Smart: When prices are rising, it is important to be a savvy shopper. This means comparing prices, seeking out sales and discounts, and buying in bulk to take advantage of lower unit costs.

6. Consider Fixed-Rate Investments: Inflation can erode the returns on investments, especially those with variable interest rates. Fixed-rate investments, such as certificates of deposit (CDs) and government bonds, can provide a stable return that is less affected by inflation.

7. Maintain an Emergency Fund: It is crucial to have a financial buffer to fall back on during times of high inflation. An emergency fund can help individuals cover unexpected expenses and mitigate the impact of rising prices on their day-to-day expenses.

8. Stay Informed: Keeping abreast of economic news and trends can help individuals make informed financial decisions. Understanding how inflation is affecting their purchasing power and the broader economy can help them adjust their financial strategies accordingly.

In conclusion, managing money during high inflation requires careful planning, disciplined budgeting, and strategic investing. By staying proactive and adaptable, individuals can navigate the challenges of high inflation and protect their financial stability.