Surviving Inflation

Submitted by Guy Williams on May 7, 2021

Expect to see inflation and higher taxes in the next few years following the U.S. government spending programs enacted to bring relief to our economy during COVID-19.


Typically, as the economy grows the Federal Reserve will increase the money supply steadily to meet the demands of a growing economy. However, the Federal Reserve has increased the money supply substantially since the beginning of the pandemic and some economists argue this will lead to demand-pull inflation. To put it simply, the demand of goods will go up because of increased dollars supplied by the government and ultimately outweigh the supply of goods available.


You have probably noticed gasoline prices rising and unfortunately they are likely to rise even higher. The U.S. Bureau of Labor Statistics recently reported that the consumer-price index (CPI) in the South Region has risen 0.8 percent over the month of March and 2.9 percent over the year ending March 2021. In comparison, the 2020 CPI in the South Region actually went down 0.1 percent over the month of March and rose only 1.1 percent over the year ending March 2020. To better prepare yourself for the risks of inflation in the coming years, you should start implementing a few financial tactics that will help you survive inflation.


First, invest or hold on to hard assets like real estate. Real estate usually goes up in value over time and the demand will always be there because people will always need housing. Plus, mortgage rates are at historic lows.


If you find yourself with extra cash, you should start investing. The key to investing is diversifying your portfolio. When choosing stocks, focus on companies that generate cash and can pass their rising costs due to inflation to consumers. If you are looking for low risks, you can invest in bonds which adversely bring low returns. And, another investment option is real estate investment trusts (REITs) which contain income-producing real estate that generally have low risks and high overall returns. Otherwise, work with an advisor to try to invest in a portfolio that fits your financial goals.


No cash on hand? Whatever your income is, the best financial tactic to limit the risks of inflation is to try to spend less than what you make and find ways to save. Start with setting a budget and more importantly following it. Some financial experts recommend a zero-based budget where every dollar you earn is counted toward expenses, savings, and debt payments. As far as saving goes, explore creative ways you can achieve this. One idea I came across was an envelope challenge. To begin this challenge, you number 100 envelopes $1-$100. Then, for the next 100 days randomly pick an envelope and put the dollar amount labeled on it towards your savings. Your total savings from this challenge will total $5,050 once completed.


Nonetheless, you should start practicing these financial tactics today to help you survive inflation. Also, if you need assistance, you can always contact one of our bankers to help you strategize a personal financial plan.