How to survive inflation, according to 5 financial planners

How to survive inflation, according to 5 financial planners

Welcome to Personal Finance Insider, a bi-weekly newsletter that connects you with the stories, strategies and tips you need to stay better with money.

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Here’s what: Financial planners have given us an overview of how to get through record high inflation

Like most Americans, I’ve been experiencing dizzying sticker shock in recent weeks.

I went shopping over the weekend and kept whispering and shouting “Inflation!” and I shake my head every time I reach for an item I would normally buy without thinking, but I could no longer justify the cost (for example: $ 8 for blueberries!). I also stopped at a gas station and wondered if I was back in California when I saw a pump from Philadelphia priced over $ 5 a gallon.

Overall, I probably spent $ 30 or $ 40 more on food and gas than I had a few months ago.

I decided to seek professional help: I ​​asked five financial planners I know, whom I trust, to share exactly what they tell their clients about how to beat inflation.

1. Be smart about where you have cash

If you need your money in less than a year, Atlanta financial planner Malik S. Lee suggests that you keep it in a high-yield savings account. “These accounts should raise their rates because the Fed fund’s rate is still rising,” he says. For the cash you plan to use next year and up to three years, Lee says he is redirecting clients to Series I savings bonds, which currently pay 9.62% ($ 10,000 limit), and multi-year fixed annuities, which pay more than 3, 5% (and have no annual limit). ).

2. Focus only on critical home repairs

Chloé A. Moore, an Atlanta-based financial planner, says her high-income clients were mostly lucky not to feel the effects of inflation. But things between homeowners were a little more complicated.

Moore says some clients who may have wanted to make repairs or home improvements have had to suspend their plans as material costs continue to rise. At the moment, according to her, they focus only on making “critical repairs or upgrades that would significantly improve their quality of life.”

3. Rethink your home purchase if rising mortgage rates put your budget too low

With housing prices rising across the country, it may seem like the time is “now or never” to buy a house. Who knows if prices will stop rising and if so, they will be discounted? But while the market is on fire and buying a home may seem urgent, financial planner Natalie Taylor, based in Santa Barbara, California, says she is helping clients calculate what an increase in mortgage rates would mean for their budgets, which may mean that it is not time.

“I calculated what the difference in the monthly payment would be for every 0.25% additional interest so that clients could clearly understand what the higher rates mean to them,” he says.

It also recommends Tier I bonds for those who want to protect their emergency funds from inflation.

4. Know your expenses

Spending in an inflationary environment can be dangerous to your financial plans, especially if you don’t know how much more you’re spending now than you used to. Philadelphia financial planner Charles Weeks says he emphasizes the importance of tracking your spending with clients.

“If you don’t know you spend $ 250 a month on food, you may not realize you’re spending $ 300 now,” he says. “But if you know your current expenses, you can tell when prices are rising and adjust accordingly. Maybe a reduction or purchase of cheaper compensation.”

5. Be prepared for the inflation to hold around

No one wants to hear it, but financial planner Malcolm Ethridge of Rockville, Maryland, says that high food, gas and entertainment prices may be for some time, probably another year or so. “This is mainly due to the Federal Reserve’s plans to raise rates several more times by the end of this year,” he says. “If demand is perceived as still high enough to guarantee a further rate hike, then there is certainly the potential that inflation could continue to creep a little more from here.”

So what can you do? Breathe and try to count as best you can. Things will eventually settle, although we may have to get used to higher prices.

– Stephanie Hallett, Editor-in-Chief of Personal Finance Insider

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