At the end of 2021, the world witnessed the highest global inflation since 2008. Consumer price inflation hit 5.2 percent and because of this, early 2022 saw a 5% inflation rate.
As the year progresses, we expect a decline. 2023 might greet us with a 2.8% inflation rate. But to make it safely to 2023, you must manage your finances smartly. So in this article, we’ve compiled 5 handy financial tips to help you survive this year!
Optimize Your Personal Budget
Prevention is better than cure. That’s exactly the gist of this tip. Optimizing your budget for inflation won’t help you make more money to deal with it. But it will allow you to save a lot of money, which will help you counter inflation.
You can optimize your budget by readjusting your expenses such that you’re minimally impacted by the rising inflation. For example, if you plan to own a house, you should go with a type of mortgage that will not severely impact your finances. Your choices are:
- Fixed-Rate Mortgage
- Adjustable-Rate Mortgage (ARM)
As a rule of thumb, it’s best to opt for a fixed-rate and low-interest mortgage, especially if you plan to live in the house for a long time (i.e., 15+ years). That’s because inflation predictions for the future may or may not be true, and a fixed-rate mortgage keeps you on the safe side regardless.
However, considering the current times, we expect a decline in inflation by 2023. In this case, ARM would benefit you more. Make sure you consider refinancing loans, paying off debts, and weighing your cash outlays before making any big decisions.
Moreover, it’s a good idea to cut down any additional expenses. It will not only save you a good amount of money during times of inflation but also help you get rid of bad spending habits. Here are some saving tips to get started.
Invest In Stocks
Suze Orman, a renowned financial advisor and popular author on personal finance, highly recommends investing in stocks to hedge against inflation. Her experience and observation of the industry confirm that stocks return the highest gains in times of inflation.
Wondering why? Well, that’s because when the prices of goods and services increase, the revenues of companies also increase. And this, in turn, leads to an increase in stock prices.
However, not all stocks are good investments. For example, a computer manufacturer may not be able to benefit from inflation compared to grain and oil traders. Similarly, a grain or oil trader may not be able to benefit from increasing prices as well as healthcare companies. So, when investing in stocks in 2022, we recommend:
- Investing in basic commodities
- Investing in industries with the highest profit margins
It is true stocks can be a risky investment. So, conduct thorough research, study the trends, consult a financial advisor, and then make a decision. The more effort you put into this investment, the higher gains you’ll enjoy by 2023. It’s also a good idea to read these 4 tips for investing small amounts of money before making a move.
Get Into Sales And Marketing
This financial tip to hedge against inflation is specific to 2022-2023. It may come in handy for later years as well, as depicted in economic trends for 2030. But for now, you’re definitely going to benefit from this financially, socially, and mentally.
Selling is the present and the future. According to CNBC, the top three skills required by any employer in 2022 are:
All three of them are relevant to sales and marketing. This is why it’s a good idea to invest in learning how to sell your product/service or someone else’s product/service. If you can learn how to sell, you’ll never find yourself unemployed. And that stands true for at least the next five years!
If getting into hardcore sales and marketing is not possible for you, consider taking an online copywriting course. Copywriters are salesmen behind keyboards, and freelance copywriters are in great demand these days.
This is especially true ever since online and remote working came into vogue due to the COVID-19 lockdowns. There are a wide range of freelancing platforms that you can use to generate a considerable monthly income, so make sure you look into them.
Make International Investments
International investments diversify your investment portfolio and serve as a major financial backup.
How so? Well, to understand this, you need to understand that the 5-percent inflation at the end of 2021 wasn’t uniform.
Some countries like Iran experienced an annual inflation rate of 27.5 percent, while countries like Japan experienced an annual inflation rate of 0.5 percent.
Owing to this diversity, it is a good idea to distribute your assets in different countries, preferably in those which are economically stable or thriving. You can use online tools like worldometers to track the inflation rate of countries and make an informed decision about where to invest.
Exchange Trading Funds (ETFs) are also a safe investment strategy for 2022. They are a type of mutual fund that invests in different assets, including stocks and commodities. This diversification reduces the risk involved in ETFs and makes them a reliable investment.
Invest In Gold And Bitcoin
The price of gold rises with inflation, which is why it’s a safe investment. Before we head further into 2022, it is a good idea to invest in gold and secure your hard-earned money. Otherwise, the rising prices and increasing life needs may leave you bankrupt by the end of the year.
With that said, remember that gold gives the best returns in five years or so. In case you’re investing in gold now, you should expect to reap the benefits of your investment by 2027 or 2030.
Similarly, bitcoin can also prove to be a smart financial investment. Although there’s not much history to help us assess how stable and successful this investment could be, current trends and predictions seem to make rewarding promises. Still, keep in mind that crypto markets are highly volatile and you might end up losing most of your investment within a short period.