Why I’m not worried about inflation and neither should you be.

Contents (Jump Links)

The Situation

Why inflation is actually good!

So how is inflation good?

How inflation can hurt you

  1. Consume less. — This is not always easy for everyone.
  2. Make more. — Your employer isn’t just going to give you more money because of inflation. The COLA (Cost Of Living Adjustment) you receive will likely be something close to the downplayed government number. This isn’t a new phenomenon, but with inflation heating up, the effects will impact you more than they have in the past. However, we are in an incredibly hot job market. You have negotiating power for a higher wage, or better yet, finding a higher paying job (best way to get a big pay raise for the same amount of time worked).
  3. Check out my article “How to Make More Money” for some tips and tricks.

Why I’m not worried about inflation

My biggest expenses are fixed:

I hold almost no cash:

My investments are doing much better than the rate of inflation:

I don’t spend all that much:

What can you do to protect yourself from inflatino?

  1. Ask for a pay raise or switch jobs. This is one of the hottest job markets we’ve ever been in. Don’t let your employer lowball your annual raise. In fact, asking for a pay raise is listed as 1st in my article on How to Make More Money. For more ideas, check it out.
  2. Avoid cash! This is easily the most important thing you can do. Make sure you put your money in productive assets, such as stocks, I-Bonds, real estate, or other investment vehicles. Cash is king when you need to buy something. If you don’t need to buy something it should be treated like radioactive waste! put it to work.
  3. Try to find ways to lock in your recurring expenses. I have by getting a 30-year loan on my home. You can negotiate fixed rates for services you routinely use. If you’re renting your home or leasing your car, your costs are inevitably going to go up when the agreement comes up for renewal. I strongly encourage you to avoid these types of reoccurring costs where someone else determines what you pay.
  4. Another reoccurring cost to avoid is daily services, such as cleaners, landscapers, handymen, etc. You’re going to feel the impact a lot more than people who do things for themselves.
  5. Take advantage of low-interest rates. I normally encourage people not to buy things on credit, BUT if Apple is willing to give you a 0% payment plan for two years on a phone purchase and inflation is over 6%, the math explains itself. Your $$ tomorrow is worth less than it is today. Just make sure your purchases are smart and you aren’t spending more than you would have if you paid for everything with cash. Just because credit is cheap doesn’t mean you should live beyond your means. Also any money you save by buying on cheap credit today needs to be invested.
  6. Spend less. I know we all want shiny new things, but using what you have for longer, avoiding purchases with high reoccurring costs (like a pool), and being smarter with your money makes the real impact of inflation much smaller. Remember it’s 100% off if you don’t buy it. The same tricks to saving money in low inflation are even more applicable in a high inflation environment.

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