Last month America suffered the biggest jump in consumer prices since the inflation crisis of the early 1980s.
But experts are warning: don’t get too wrapped up in the panic over hyperinflation. The small, steady upward ticks of current inflation rates are enough to wipe out the value of the dollar and put the everyday cost of living well out of reach for many Americans.
As Intelligence Investing puts it:
Inflation is a funny subject because no one really talks or cares about chronic high-ish inflation below the threshold of runaway inflation; it is hyperinflation that is the bogeyperson. You would think inflation has to be hyperinflation to count and that is wrong… It does not take double or triple figure inflation to cut money’s value in half within a decade. (emphasis added)
Today we’re covering the most important prep steps to shore up your household against the snowballing march of inflation. Some of these suggestions may take you a little out of your comfort zone, but they’re vital to your preparedness.
Worried about Inflation? Here’s Why Your Intuition Is Correct.
Regardless of what you think about the prospect of hyperinflation, there’s no denying that the economy is in a topsy-turvy state. Production is down because of COVID, demand is suddenly up, and it’s driving prices through the roof.
How devastating these current conditions will prove to be and how long they’ll last remain to be seen.
However, for those who know, the bigger worry is the long-term direction of the country. Intelligence Investing said:
The fear of high double figure inflation or hyperinflation is growing because people have seen that incredible amounts of token money has been created out of thin air and it is intuitive that this will debase currency. This intuition now seems to be playing out in front of us. (emphasis added)
Commonsense Steps to Secure Your Household Against Inflation
The good news is that while you may not be able to control the American economy, there’s a miniature economy quietly churning away every day in your own household—and that’s something you can control.
Here are ways to tighten, save, and prepare, that will protect your family against inflation:
Control What Goes Out. Be Deliberate!
There are two parts to your household economy: money that comes in and money that goes out. So many people put all their focus on the money coming in—salaries, assets, etc.—that they overlook the possibility of accumulating wealth by strategically planning the money going out.
But if you’re deliberate, thrifty, and disciplined with your spending, the pressure of a higher income can be greatly relieved. This is one of the big secrets to prosperity—by simply controlling their spending, a household making 70k a year can easily enjoy more cash on hand than a household making six digits.
Controlling the money you spend is one of the best ways to prepare for coming inflation. Here are some tips for achieving it:
We hear this again and again, but it’s a bedrock principal of financial wellness. To prepare for inflation, you’ll want to make every sacrifice you can to pay off credit cards, student loans, and even car payments. The less you owe others, the more flexibility and freedom you’ll have when prices go up.
Love or hate him, the guru of debt-free living is Dave Ramsey. His program for financial peace has helped millions of Americans get out of debt (we've borrowed a couple of his suggestions here). Check out his website to learn more.
Make $500 (or More) Your New $0
Once you’ve cut as much debt from your life as possible, this is the first step to staying out of it permanently.
Many of us live on the knife’s edge, paycheck to paycheck. Once the pay period’s over, our bank accounts rest perilously close to zero. A single car repair or medical bill is all it takes to push us back into the red.
But if you’re able to put away a little sea-wall of cash—say 500 dollars, 1,000 dollars, or even more—you’ve got money to absorb many of the sudden, unexpected expenses that are part of everyday life.
Make Easy, Strategic Cost Cuts
Getting to that $500 cash buffer takes time, but if you’re creative in cutting your monthly costs you can expedite the process. Remember, a few little cuts can add up to big monthly savings!
Phone Plan – Look for things you can live without. For example, do you need the newest smart phone? There are plenty of excellent wireless companies with plans totaling 15 to 20 dollars a month. You’d be surprised at how well “lower-end” phones perform and how little data you actually need if you spend most of your time on home, school, and work wifi networks.
Cut the Cord – Another easy place to lower expenses is with your television bill. As far as the big media companies have come with on-demand programming and bundling, they still can’t beat cord cutting for cost effectiveness. Try living on a lower-priced Internet plan and winnow your entertainment down to one or two content platforms. You'll be surprised at how much you save!
Reprioritize Your Car Buying Criteria – Buying the right car will also save you tons of money—it’s hard to understate just how much!
Sure, there’s lots to love about a newer, trendier vehicle with all the bells and whistles, but prioritizing reliability and gas mileage over added features can save you untold thousands in maintenance and repairs.
These days, with some research (Consumer Reports is a great place to start), you can get yourself into a used car that will easily run for 300,000 miles or more. It may not impress the neighbors, but you’ll be a lot better off when times get tough.
The Power of Thrifting – Lots of necessities like clothes, dishes, and children’s toys can be picked up for close to nothing at thrift stores and estate sales. Take advantage of this opportunity to save!
This isn’t to say all your clothes need to come from the thrift store. We find that new shoes are better than worn-out thrifted ones, for example. But shirts, blouses, dresses, some pants…you can still look sharp, clean, and in style integrating thrifted items into your wardrobe.
Prosperity Is Key – With all of this, remember: trimming costs doesn’t mean living a cheap, deprived lifestyle. There are important things you shouldn't eliminate from your budget.
For example, we wouldn’t recommend cutting back too much on groceries. A healthy, balanced diet with plenty of fruits, vegetables, meats, etc., is extremely important to your well-being. It also helps prevent medical expenses in the long run. (This is also why you shouldn’t just toss out your gym membership if it helps you stay in shape.)
The “Hot Potato” Rule
As you strategically select what to cut and what to keep, try to stick the “hot potato” rule.
Nowadays, many companies offer month-to-month subscription plans that you can cancel at any time.
These plans are golden for the thrifty prepper.
Imagine: If at least half of the bills you pay are month to month with free cancellation, it means you can drop them without consequence at a moments notice when things get tough (like during a period of runaway inflation). You could theoretically cut your household expenses by hundreds of dollars overnight and pick those subscriptions back up when things even out.
Store Up Food & Water
One of the biggest benefits of purchasing a house over renting is that you can lock in an interest rate and monthly payment, protecting you from the ups and downs of the market.
Did you know you can do the same thing with food?
It’s true! Food prices are no different than housing prices—they go up and down with the market. At a time like this, with inflation looming large, you’d be wise to purchase long-term food supplies at today’s prices.
Then, when the cost of food skyrockets (like they’re doing now) you have a stockpile on hand that you can integrate with your grocery store food and extend its life.
And as long as you’re storing up food, don’t forget water storage. You need at least a gallon per day for rehydrating meals, drinking, and basic hygiene. It’s the ying to your food supply’s yang. No stockpile is complete without it!