4 ways to prepare your money for months or years of high inflation

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When it comes to personal financial space, inflation is on the minds of many people. Financial planner Anjali Jariwala does not miss this.

“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 so much stimulus money, things started to open up again and a lot of people were spending more,” she said. to Insiders. “So that pushed up supply and put pressure on inflation.”

Unfortunately, Jariwala said, experts agree it looks much more likely now that inflation will continue for the foreseeable future.

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

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

1. Adjust Your Daily Spending Pattern

Jariwala said saving enough money is very important now as everything is getting more expensive and prices are only going to go up. The best way to do this is to adjust your daily expenses and try to cut back where possible.

She said that by reducing spending, you have “a little more buffer in your money, making it a little easier and less stressful to manage on a monthly basis.”

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

2. Fatten up your emergency fund

Jariwala said that when the COVID-19 pandemic first started, she told her customers, “Cash is king.”

“I think it’s kind of the same sentiment at the moment 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, as personal disasters can strike for anyone at unexpected times.

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

There are many ways to save more; two popular ones are: pay yourself first and automate your savings.

3. Look for cheaper and rent-stabilized homes

House prices and rents are rising everywhere, and some areas are being hit harder than others. Jariwala said that in her home state of California, rents in certain markets have suddenly jumped anywhere from 30% to 50%.

That’s why she strongly recommends that people prioritize units that are rent-stabilized in their search, which will make your annual housing costs much more manageable over time.

Jariwala also cited the boom in work-from-home setups as a perfect opportunity to move out of expensive housing markets for more affordable ones.

4. Adjust Your Retirement Calculations

If you’re thinking a little more long-term and wondering how inflation could affect your retirement plans, Jariwala said the most important things to look at are your current spending levels and how much you need to afford the lifestyle you want. at retirement.

“When I Do Retirement Planning” [with clients]”The way I do it is cash flow based,” says Jariwala. “Because it’s cash-based, inflation affects that because inflation is significantly higher.”

She said that when she calculates for her clients how much they will need after retirement, she uses a 2.5% inflation 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 in the near future,” she said. “I don’t expect inflation to stay at this level forever, but I don’t know how long it will last.”

Adjusting your calculations for inflation may require you to save more each month or cut your retirement by a few years. But knowing what to do in advance can help you retire more smoothly in an uncertain future.

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