How to Beat Inflation with 3 Easy Strategies

Finance Tips

‘The silent killer of money’—a synonym for inflation, and enough reason to want to overcome it. And there’s a good reason for it. If left unchecked, inflation can erode the value of your euro, meaning everything you buy becomes more expensive. Ordinarily, a little inflation – roughly 2% annually – is a normal part of a healthy economy. A modest increase in the cost of goods and services encourages people to spend money, contributing to economic growth. But, if inflation rises too quickly, money begins to lose value, and the price of goods and services increases.

Yes, you can beat inflation.
Yes, you can beat inflation.

In June 2022, annual inflation in the EU was up 9.6%, with the Baltic states suffering the highest jump in annual inflation across Europe. Estonia endured a painful 22% inflation increase, while Lithuania and Latvia trailed closely behind at 20.5% and 19.2%, respectively. Unfortunately, the Baltic states are hardly alone in their struggle against inflation. Across the EU, more than a dozen countries posted double-digit annual inflation increases. In short, almost no one has escaped the near-universal rise in the cost of goods and services in Europe.

So, we know inflation is a problem but is there anything you can do about it?

Let’s discuss 3 strategies you can use to help weather the storm and beat inflation.

1. Cut back on your spending

One of the fastest and easiest ways to fight inflation effectively is to reduce expenses and cut back on spending. While you might not be able to do anything about your mortgage or car loan, you can probably afford to get rid of a couple of those digital subscriptions or streaming services. In addition, you can limit your spending on social outings, so instead of opting to go out for food and drinks, consider inviting some friends over for a potluck.

Instead of going out to eat, save money by inviting friends over for a potluck dinner.
Instead of going out to eat, save money by inviting friends over for a potluck dinner.

When times get tougher, we must be more patient and creative with how we spend our money. Often, we pay a premium for small conveniences or brand-name items. With inflation as high as it’s been, take a moment to ensure you’re getting the best price possible before making any purchases. That might mean having your coffee at home instead of going out, shopping in bulk, buying things on sale, or using coupons, and saving a couple of euros by opting for generic or off-brand products instead of the brand names.

If inflation is at 10% annually and you can reduce your expenses by 10%, you’ll be able to stave off inflation with just a few minor adjustments to your lifestyle. It’s as simple as that.

2. Invest

Another popular strategy for beating inflation is to grow the amount of money you have by investing. Investing can help you earn a passive income, helping to compensate for the loss of value due to inflation.

There’s no shortage of options for investing – the only question is which ones are right for you. Here are some investment choices commonly used to fight inflation.

Stocks

Inflation can affect different types of stocks differently. For instance, growth stocks that need to borrow money to grow will often struggle during periods of high inflation, since the cost of borrowing money increases during inflationary periods. On the other hand, consumer staples and energy companies will usually do just fine during inflationary times.

Investing in stocks is, for many people, one of the primary reasons for investing in the stock market. Money kept in the bank will decrease in value, and while stocks can be uncertain, the stock market tends to increase in value over the long term and help people retain the purchasing power of their money.

Government bonds

Remember, bonds are just debt securities, so when a government (or a company) wants to get their hands on some cash, they’ll make a promise to investors to pay that money back with interest. For lower-risk investments with predictable returns, many investors turn to government bonds. Certain bonds are even designed specifically to beat inflation, such as U.S. Series-I Savings Bonds (I-Bonds) and Treasury Inflation-Protected Securities (TIPS).

Precious metals

Precious metals are one of the best-known and most popular ways for governments and individual investors to try and beat inflation. One of the reasons gold and other precious metals are known as the go-to hedge against inflation is because their supply is always limited, and they are valuable to people on a near-universal level.

Gold and other precious metals have long been considered excellent protection against inflation.
Gold and other precious metals have long been considered excellent protection against inflation.

Real estate

When inflation strikes, real estate typically increases in value. Inflation results in asset values increasing, and real estate is no exception. So, if you own real estate that you rent out, average rents will usually be higher, so you can charge tenants more. The same concept applies to home sales prices, which also increase alongside rising inflation.

Peer-to-peer lending

Peer-to-peer lending (P2P lending) is a unique way to diversify your portfolio and a tool to fight inflation. When inflation spikes, so do interest rates, which means you can charge borrowers more interest when you loan money. Even though inflation is on the upswing, P2P lending can account for that change and generate higher returns for you during periods of higher inflation.

3. Get a raise

While there are no guarantees that your employer will be willing to give you a pay increase, asking for a raise in response to rising inflation rates is a request you’re entitled to make. Of course, asking your boss for a raise is something that has to be done tactically. You’re probably not going to get what you want by demanding more money, simply because everything costs more. Instead, carefully build your case and come up with the research to support your request.

Asking for a raise can help you increase your income; remember to focus on merit, not need.
Asking for a raise can help you increase your income; remember to focus on merit, not need.

When you approach your employer, try to focus on the value you bring to the company, highlighting some of your recent achievements and how they contributed positively to the company’s goals and objectives. You should also consider looking at the average salaries of employees in your role at other companies, which can help justify your request. Finally, you can mention the increased cost of living due to inflation –keep in mind that you’re asking for a raise based primarily on merit and not just because life has gotten more expensive.

Inflation can be beaten

Inflation is a powerful mechanism that can devalue your money. But by using these strategies, you can combat the decay and maintain or even grow your wealth. Do your research, make smarter financial choices, and use your skills to beat inflation.

Looking for more inflation-beating tips? 😊 Here you go.