They say the only certainties in life are taxes and death. However, inflation could be described as the third certainty of life because each of us will encounter it. It is invisible and subtle, but we must deal with its consequences. Inflation reduces the purchasing power of money. In other words, it increases the prices of products and services in our economy.
If you are trying to save, they will mercilessly take their share of your money every year. If you have an interest rate of 1% on your savings account and the annual average inflation is 3%, you will be 2% poorer in real terms. In the uncertain times of the coronavirus and quarantine measures, economic experts are sounding the alarm and predicting an increase in inflation shortly.
So what can you do to protect your savings at a time when interest on savings accounts is close to zero? We bring you tips on how to take care of your finances.
Invest and create passive income
Investing and passive income are closely related because you can earn passive income through investing. Building it is one of the best ways to protect yourself from inflation while receiving regular money without having to work for it. On the contrary, money will work for you.
Does earning money without a job sound like a dream to you? It is possible to build passive income, but you need to work on it continuously. You will get it after some time, but you can take the first step toward creating it today.
Invest in stocks
Buying shares is a safety brake against the effects of inflation. Certain types of companies have growth tendencies during periods of increased inflation. Inflation allows them to increase the prices of products and services. These companies provide production resources for consumer goods such as oil, grain, or metals. Alternatively, you can invest in commodity or pharmaceutical companies.
These companies have high margins and relatively low production costs, and most people need to avoid buying their products. Also, focus on dividend stocks. Dividends increase the overall return on investment and are on your side in the game against inflation.
Invest in real estate
Real estate has been a safe investment for centuries. You can buy them either for your own needs or for rent. Although the real estate market has also experienced several downturns, it is growing in the long term. Therefore, it is advisable to consider real estate investment long-term because it can protect your money for decades.
You’ll likely take out a mortgage if you need the cash to buy. When you have a well-set interest rate fixation, it can quickly happen that rising inflation will make your loan cheaper. Although the nominal installment will remain the same, it will decrease in real terms.
Invest in yourself
You may find this form of investment somewhat unconventional, but in uncertain times it is the best investment you can make. Investing in education can give you a higher return in the future than many financial instruments. It does not have to be only about education in economics and finance.
You can maintain and deepen existing professional knowledge or learn something new to gain a competitive advantage. Thanks to ongoing education, you will increase your price on the labor market or acquire new customers who will bring you additional money. In addition, knowledge, knowledge, and the ability to apply it in practice will never be taken away by anyone, not by inflation.