Top Tips for Fighting Inflation and Protecting Our Pockets

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I'm Financial Coach, NFEC-certified Financial Educator (CFEI), and café-con-leche fanatic with a passion to help CLOSE the gap in Financial Literacy through my business Wear Your Money Crown™.

HI, I'M ANNA!

It’s Time to Take Action against the Rise in Prices!

Whether you have recently been purchasing groceries, ordering items online, following the price wars going on in real estate, shopping for luxury goods, or investing in the financial markets you are probably very well aware that INFLATION – the general rise in prices over a period of time – is hitting our pockets.

And it is hurting us with a big old & painful OUCH!

Just the other day, I was talking to my sister in Puerto Rico and she asked me, “Guess how much it cost to buy a croissant, some cheese with toast for your niece, and a small coffee at our local bakery?”

Less than two years ago, I would have estimated the meal to cost less than $10.00. However, knowing full well that global prices have been rising, I estimated a punchy number.

“$14.95,” I said confidently.

“Nope,” she replied. “It was $19.00.”

 Mic drop.

In fact, the U.S. Bureau of Labor Statistics backed this up recently with June’s Consumer Price Index (CPI is a well-known measure for inflation) indicating a rate of 5.4%. This was the largest monthly gain since August 2008!

If we exclude food and energy (called core CPI), inflation in June increased 4.5%, which is the largest LARGEST 12-month increase since November 1991…Wowzers!

In the UK (and many countries globally), we are also facing inflationary pressures when buying our pint of beer, shopping for groceries, and even paying our utility bills. According to the UK’s Office for National Statistics (ONS), the Consumer Price Index including owner occupiers’ housing costs (CIPH) rose 2.4% in June 2021, up from 2.1% in the last 12 months to May.

Inflation is not just concerning to consumers, but for companies as well as the increase expense on labor, materials, and shipping continues to rise.

In fact, one of the most common words used during their recent calls during Q2 earnings season was “inflation.” According to Bank of America Global Research, mentions of “inflation” rose over 1000% per earnings call year on year.

As we can see, inflation is very REAL my friends and we do ourselves a disservice if we ignore it.

So, here’s a few of my Top Tips to help defend ourselves and our pockets:

CASH:

Don’t leave excess cash sitting in a low-interest savings account.

Remember, cash sitting idle loses its purchasing power as inflation increases. Research where to park your money for the best Interest Rate possible, meaning shop around! Sadly, loyalty doesn’t pay when it comes to our bank deposits. Also, consider if you really need all that cash sitting in a savings account or if you can invest a portion of it (see further below).

However, always remember that your EMERGENCY FUND (those 6-12 months of living expenses) should ALWAYS remain in CASH. No Ifs or Buts about it!

FOOD SHOPPING:

When grocery shopping, make sure to do your homework, use coupons, buy generic brands, consider buying in bulk, and make sure to take advantage of price comparison sites such as the UK’s My Supermarket Compare or apps like Basket in the USA.

Another of my favorite tips is going food shopping on the right day. For instance, I shop at our local Italian specialty store (a little emporium of fabulousness, but steep in price) on Sunday evenings. Why? Because many prices have been marked down to clear, as they tend to restock shelves on Monday mornings. I often get some great deals at more than 50% off. Bellissimo!

INVESTING:

Monitor your current investments and choose wisely. Also consider looking at high-yield dividend stocks. These kind of stocks not only provide us with a “predictable income” via dividends, but allow us to potentially achieve long-term growth as well.

Now, I must point out that these types of stocks are better suited in a long-term investment strategy, as they can experience volatility (like many things) over shorter timeframes. So, instead of monitoring your account like a hawk and focusing on their day-to-day price movements, consider names that you are happy to stick with for some time. As always, choose companies with strong business models, stable and diversified income streams, consistent dividends, and good management.

Not sure where to start? Check out the Dividend Aristocrats Index for inspiration. This index measures the performance of S&P500 companies that have consistently raised their dividends for at least 25 consecutive years. Pretty neat, right?

INCOME DIVERSIFICATION WITH REAL ESTATE:

Consider diversifying your income by including real estate into the mix. You may not have a second home to rent out, but consider if there are areas of your house you can rent through online platforms like Airbnb.

It could be a lovely cottage in the garden or even an extra room within your home.

Also, think outside the box! You could even consider renting out your home as a film set or photo shoot (yep, look it up online). In the UK, you can use Shoot Factory or Locations Hub in the USA & Canada (there are many websites for this).

Just remember to follow the rules (not all properties allow these type of rentals, so make sure to check it out first) and have the proper insurance in place to protect yourself.

INCOME EXPOSURE VIA REITS:
Another way to gain exposure to real estate without the hassle of actually buying & managing properties yourself is purchasing REITs, which are Real Estate Investment Trusts. In a nutshell, they are companies that own, operate, or finance commercial real estate that is “income-producing”. This can include properties such as malls, hotels, self-storage facilities, warehouses, and apartments.

Publicly traded REITS are traded on the exchange just like Stocks and ETFs and you can purchase them either individually, via a mutual fund, or even an ETF.

REITs generally pay decent dividends, however not all REITs are created equal and there are different types to choose from. So, do your research. Here is a helpful LINK that gives a good overview of this asset class.

ANTI-INFLATIONARY INVESTMENTS:
There are endless debates as to whether gold and cryptocurrencies (digital currencies such as Bitcoins) are really “anti-inflationary” investments. Personally, I think that a lot of assumptions being used as to their “non-effectiveness” in fighting inflation can be a little misleading.

Whichever side of the debate you are on, it’s fair to say that they add diversification to our portfolios – combining elements of currency with stocks. It’s also encouraging to see companies like Goldman Sachs, JPMorgan Chase, PayPal, and even Amazon getting involved.

Although I used to be extremely sceptic of this asset class, I have recently softened my stance. Why? Because I see it as a play on digitalization via its decentralized infrastructure and the security of Blockchain (distributed ledger technology).

This said, I am still very much MINDFUL that there is A LOT of short-term volatility around it and it requires a certain mindset, knowledge, and having a financial cushion. That is why I also heed a word of caution about cryptocurrencies.

I do not believe that you should be investing in this asset class if you have high-yield debt outstanding and haven’t built a healthy emergency fund and other short & long-term savings. I also think that you should not be involved in cryptocurrencies if you are not maximizing your retirement savings and/or haven’t already built a diversified investment portfolio.

As a side note, I will be including cryptocurrency in my upcoming Fall Group Coaching Program – Make Your Money Grow! So, if you are interested to know more about it, please visit https://wearyourmoneycrown.com/course and sign up for the WAITING LIST.

INVESTING IN TIPS (Treasury Inflation-Protected Securities):

Treasury Inflation-Protected Securities, known as TIPS, are USA Government Bonds structured in a way that they counterbalance the results of rising prices by adjusting its principal value as inflation rises. They are referenced to the Consumer Price Index (CPI) and be bought as a standalone, in a mutual fund (I’ve done this in the past), or even an Exchange Traded Fund (ETF).

Just like USA Treasury bonds, TIPS have fixed coupon rates and pay interest on a semiannual basis. Please be aware that although the coupon rates are fixed, the coupon payments fluctuate based on the underlying principal value. For my UK friends – We have the same here & they are called Index-linked gilts.

In general, TIPS are an awesome way to protect against inflation in the LONG TERM but KEEP IN MIND that they could have a poor performance in shorter periods of time, given that the price may fall more than the principal is adjusted upwards.

It is also important to note that in the current rate environment it may not make sense for you to buy TIPS (carrying negative yield currently), only you can make that decision. However, I’d like to point out an interesting article by Schwab that noted “in the 12 months ending May 31, 2021, the Bloomberg Barclays U.S. TIPS Index delivered a total return of 7.1%, even though the starting yield was negative.”

If you want to learn more about TIPS, then head over to Treasury Direct here.

So, there we have it friends! Those are my Top Tips for fighting inflation and protecting our pockets.

Please do let me know if you have any other inflation saving tips to share, I’d love to hear from you. : )

As always, remember that before making any financial decision DO YOUR RESEARCH and if you need help then reach out to me by booking a Free 20min Discovery Video Call.

Wishing you a fantastic weekend & remember to Wear Your Money Crown & Rule Your Finances!

XoXo,

Anna

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GET MY FREE GUIDE TO FINANCIAL HEALTH!

Download my Top Tips for Financial Health guide and start ruling your finances today!

GET THE GUIDE

I'm Financial Coach, NFEC-certified Financial Educator (CFEI), and café-con-leche fanatic with a passion to help CLOSE the gap in Financial Literacy through my business Wear Your Money Crown™.

HI, I'M ANNA!

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