Inflation is a huge topic nowadays. You will find one or the other person discussing inflation wherever you go. It can be worrying and confusing to hear about inflation, especially when you don’t know how to combat it.
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What is Inflation?
First off, what is inflation? Hearing about how inflation is “ruining the economy” can be really stressful if you aren’t sure what it is, so let’s break it down.
Inflation means the overall cost of goods (things you buy) and services (paying people to do things) increases. For you, this means that you get less when you pay the same amount of money.
You might have observed this already. Groceries are a great way to see how inflation is impacting your budget. You buy them every day, so you notice even the slightest changes. For example, your favorite cereal costs a dollar more for the same size box as before, or the box could get smaller while the cost stays the same.
It’s crucial to remember that true inflation is when the overall cost of goods and services increases. Just like groceries (oil, real estate, clothing, etc.), going up in price isn’t necessarily a sign of inflation. It’s all of them going up in price at the same time. It can result in a lot of problems for the average person.
For instance, wages might not go up to match inflation. That means you could be drastically underpaid for doing the same job. Your savings account might go through hard times, too.
For example, you have enough money to cover your three-month living expenses. Inflation means your savings account won’t cover the full 3 months anymore. Savings accounts also have interest rates that change, so your interest may not help you cover the loss.
So how do you make money despite all of this?
Check out these two easy ways to make money and get ahead!
1. Put your money to work and pick a smart investment
Investing is another big, scary “money” word that can confuse you. When you’re trying to make money during inflation, though, investing is crucial.
“Investing” means putting your money into something that will get you more money in the future.
Suppose your home has a fixed-rate mortgage; congrats! You’ve made a great investment. Investing in real estate with fixed-rate mortgages or loans is one of the simplest ways to make money during future times of inflation. Even if you choose not to sell, you’re protected against rent increases.
Check out DiversifyFund to help invest in real estate, stocks, and more.
They’re an investment company focused on helping “everyday investors” like you make smart choices with investing.
A more achievable form of investing is buying TIPS. “TIPS” stands for “Treasury Inflation-Protected Securities.” Essentially, you buy a kind of check from the government that you can cash in, in 5, 10, or 15 years.
Like a savings account, TIPS accrues interest. Unlike a savings account, however, TIPS are inflation-protected. It means that the government will keep track of inflation over time while you wait for your TIPS to “mature.” When you cash in your TIPS, the government will either pay the amount listed on your TIPS or the amount adjusted for inflation, whichever is higher.
TIPS aren’t available all the time, but when you can, they’re a great investment. You can buy TIPS from a broker, bank, or here. You can make a good amount of money during inflation by buying TIPS when their value is low and cashing in at the peak of inflation.
Finally, you can invest in what’s called “commodities.” There are a few different commodities, and we don’t have time to go into them here. Precious metals and gems are the most achievable commodity for people trying to recover their bank balance during inflation.
People frequently rush to store cash during inflation, but that’s when money loses its value. On the other hand, gold, silver, and gemstones gain or maintain value. It makes them a great way to escalate your money-making during inflation.
2. Earn more money on the side – Follow this simple tip for a profitable side hustle!
The next way you can make more money during tough times like inflation is by starting or adjusting your side hustle. Regardless of your skills, hobbies, or interests, you can make money (even during inflation.)
You can start working on platforms like Fiverr, Upwork, or Etsy, where you can set your prices. Then you can go on one of two paths with pricing.
On the one hand, you can charge high prices. In this way, the rising costs of materials or the value of your time are more than covered. You can also cater to niche markets with extra money to spend on your goods or services. It can be extra beneficial when inflation slows since you’ll already have a customer base willing to spend extra money for your brand.
On the other hand, you can go in the opposite direction and charge very low prices for your work. Such a “dirt cheap” approach allows you to reach more people since no one will need to spend much money to afford your services.
This is also another best option if you need to make money during inflation that immediately hits your pockets. The one problem is that you won’t be paid very well for your time or materials, but if you’re doing something that you enjoy or that you’d be doing anyway, this is a great way to get that to pay off.
Pros and Cons of Inflation
- Moderate Inflation is a sign of a healthy and growing economy
- Inflation helps keep money from losing value too quickly.
- Inflation incentivizes businesses to increase their productivity and motivates them to do so.
- Inflation can cause a lot of damage to the economy, including job loss and decreased demand.
- Inflation can reduce your purchasing power.
- Rising prices also mean that retirees living on fixed incomes benefit less from their savings.
Inflation can hurt your financial situation if you aren’t prepared. Your money loses some of its buying power, and while you’re waiting for wages to catch up, you can find yourself under a lot of stress.
You aren’t helpless if you aren’t ready in mind, though. During inflation, supply and demand for labor and goods are mismatched. Your skills are worth a lot of money, and you can use them to make money during inflation.
Finally, if you are prepared, inflation is nothing to be afraid of. A little bit of preparedness can pay off in a big way during inflation. If you are thinking about how to make money during inflation, regardless of how your financial book looks like, then you can overcome this by cashing in on things you did in the past.
No matter what, you need to do something that works for you. The best way to make money during inflation is by investing, and investing can work for everyone. It’s just a matter of finding which skills and finances you have to invest with.
Real Estate, Precious Metals, and Stocks are often seen as good investments during inflation.
During inflation, it is important to focus on saving money to prepare for potential emergencies. You can also invest your money to capitalize on the advantages of compounded returns.