How To Defeat Financial Incapability Amidst Rising Inflation
Inflation is unavoidable! No living thing on the planet can stand up to its might. Over time, it depletes wealth. It has no regard for central banks, treasury officers, or investment managers.
When the economy grows as a result of increased spending but not as a result of increased production, the inflationary process occurs, making it difficult to defeat financial incapability amidst rising inflation.
It’s so disconcerting to watch the world’s population not only fighting the monster but also growing at a rate of about 8% in the United States, the highest rate in nearly four decades.
Although food prices continued to rise, Africa’s largest economy breathed a sigh of relief as its headline inflation rate fell to 15.60 percent from 15.63 percent in December 2021.
Your money in your savings account is losing purchasing power as the cost of everything from food to transportation rises. But keep your cool.
As a result, inflation can be combated without raising wages. Begin by following these guidelines:
Stock your store with foodstuffs and avoid eating at restaurants.
Food accounts for more than half of Nigerians’ income, so decreasing costs in this area would save a lot of money.
Eating out has a high price tag. However, many of the meals may be prepared and served for a fraction of the cost of eating in a formal restaurant. Breakfast may be prepared at home for much less money.
Foods cultivated or produced locally are frequently less expensive since long-distance transportation costs are avoided.
Buying in bulk might also save you a lot of money. Pay attention to the rates and go for the family-size package if it is less expensive per unit and you have the space.
Negotiate cheaper pricing to save money on routine expenses.
Almost anything can be negotiated to deal with higher prices.
Build a relationship first, then ask if there are any programs or discounts you qualify for. It does no harm to ask.
Studies show that consumers who call and ask for a lower rate, are usually successful, and this can help consumers lower their monthly expenses.
Consider deferring large purchases.
Everything will not always be more expensive. Price rises aren’t always permanent, so it’s sometimes a good idea to wait. You can put off purchasing something if you don’t need it right away.
If you wait it out, you might be able to get a better offer.
You’re in a tougher scenario if you suddenly need to acquire something more expensive. In this circumstance, an emergency fund could come in handy. You will be less likely to rely on credit cards or other types of high-interest debt if you can save more.
Keep a portion of your funds in a foreign currency.
Investing in a currency that is less susceptible to inflation than the Naira is the most straightforward and likely safest way to avoid inflation.
The objective is to keep and invest money in a currency that does not decline faster than the return obtained in Naira.
You can put your money in funds that don’t pay out a lot of money but have worth.
Even if the investment is in dollar terms, it is recommended that as the investment’s length grows, you want not only current income but also some yield to offset inflation.
Dollar-denominated debts and dividend ETFs with two options to explore if you have excess Naira currency and want to hedge and earn against inflation in the US dollar.
Ensure that your investment portfolio is well-diversified.
When choosing assets to retain your purchasing power, consider your income, spending, risk tolerance, and time horizon.
When inflation exceeds the amount you make from your investments, the purchasing power of that portion of your portfolio decreases. You do, however, have additional alternatives to compensate for it.
People seeking to avoid the inflationary scourge can find equity and security investments to provide a safe harbor.
Nonetheless, the dangers must be considered. Stocks, mutual funds, and ETFs are high-risk investments for inexperienced investors.
To avoid trying to time short-term market moves, focus on diversification and rebalancing at least once a year. With these tricks and guiding steps, you defeat financial incapability.