6 Ways to Hedge Against Inflation

I like to think of inflation as a silent killer of our money.  While you may not see it in action from one day to the next, inflation slowly kills the purchasing power of your dollar from year to year.  Economists define inflation as the gradual increase in the cost of goods over a certain period.  Put simply, it means that things get more expensive over time.  We can spend hours discussing the cause of inflation , but there really isn’t anything that we can do as individuals to stop it. While you and I may not be able to prevent inflation from happening, we don’t have to sit helplessly while it eats away at our hard earned dollars.  With a little planning and change in behavior, we can lower the effects of inflation on our personal finances.  1. Change Consumption Patterns According to Bloomberg, the retail cost of beef was over 10% higher than February 2010 prices.  For a large family that spends $200 or more on meat products each month, the increase in price can really put a dent into their food budget. How do you adjust?  Find ways to modify your meals.  Replace red meat proteins with beans or other meats that might be on sale.  Look for the ‘cost per unit’ on the price tag of the food items you’re buying and make sure you’re getting the best price you can for the food you buy. 2. Utilize Public Transit It’s no secret that you can save money by using the public transit options in your city or town.  The American Public Transit Association estimated that households using public transportation and live with one fewer car can save more than $9,900 per year.  When you add up the cost of insurance, vehicle maintenance, fuel, parking, and loan payments, it’s easy to see how fast the savings add up! 3. Walk or Bike The cost of gas is up nearly $1.00 since last fall.  For a person driving a modest 200 miles each week, they could easily pay $40-$50 or more each month just because of the higher gas prices.  If public transit isn’t an option, you might be able to fight inflation by cutting back on how much you drive.  While you may not be able to bike to work or school everyday, you can still try to decrease your dependency on a car gradually.  If you can, try walking or biking into town on the weekends.  A little exercise won’t hurt. 4. Buy Supplies in Bulk Recently, two articles shared excellent tips on how you can invest in foods and non-foods .  I’d recommend that you read these articles for great tips on how to find the deals, store bulk items and how to stretch the life of these items. On a personal note, my wife and I have benefited tremendously this past year through buying things in bulk and using it through the year.  By combining coupons and sales, we’ve bulked up on items that seem to get more and more expensive each year (stuff like shampoo, deodorant, and toothbrushes).  When we find a great deal, we buy a lot and pocket the savings! 5. Buy Stock ‘If you can’t beat em, join em.’  I don’t subscribe to this mindset for everything, but for the purposes of beating inflation, it can work quite nicely.  I’m not suggesting that you go out and buy stocks in oil, pharmaceuticals, or foods without doing the proper research first.  It’s just good to understand that some industries will perform well even in times of recession and inflation.  If you’re a stockholder, the increase in the price of these goods may not worry you as much if the value of your stock is increasing as well! 6. Invest in TIPS TIPS stand for Treasury Inflated-Protected Securities.  They’re government bonds that actually increase in value with inflation.   The value of your principal will adjust according to the CPI (Consumer Price Index).  The great part about TIPS is that when your investment matures, you get the adjusted principal or original investment – whichever is greater.  TIPS can be purchased from the TreasuryDirect website in 5, 10, and 30 year terms.  For even more information on TIPS, you can read this article on How TIPS Work . So where have you felt inflation lately?  What have you done to lessen the effects in your family’s finances? Image from Lightspring / Shutterstock Related Articles: Buying Groceries In Bulk: The Hidden Dangers Effects of Inflation How To Save Money On Groceries – 13 Tips Should You Sell Your Gas Hog? 15 ways to cut your expenses Should You Get LED Lights to Replace Your Incandescent Bulbs? 11 Ways to Cope With Rising Gasoline Prices Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook . As a thank you for subscribing to our newsletter you can download our quick eBook ” 25 Ways To Save Money in 2011 ” for FREE! The articles on this site are for entertainment purposes and should not be taken as financial advice. Please contact a financial professional for specific advice regarding your situation. Also, many of the CPF articles help us pay the bills by using affiliate relationships with Amazon, Google, eBay and others. Find out more here .

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6 Ways to Hedge Against Inflation

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