There are so many questions that beg for your attention in the investment world. How much investment risk are you willing to take? What should you be contributing to your 401(k)? What’s the difference between stocks, bonds, mutual funds, and ETFs? How will your tax situation change when you start taking withdrawals from your investment accounts?
However, in my experience when it comes to preparing for retirement, inflation is a topic that seems to fly under the radar for many people. It can silently eat up your savings and erode your purchasing power. It’s a quiet assassin that’s after your hard-earned retirement assets!
The good news is you can take steps to protect yourself from inflation and set yourself up for long-term financial success.
Here’s a few things you can do to fight back against inflation:
1. Understand purchasing power. Purchasing power refers to your ability to buy items such as necessities and luxuries. One of the main issues with inflation is that your purchasing power goes down as inflation goes up.
- Remember, a dollar today is worth more than a dollar tomorrow.
- Protecting your principal is a valid goal. But it’s also important to grow your assets at a rate that’s in line with inflation in order to protect your purchasing power over the long-term.
2. Develop an investment management strategy. Traditionally “safe” investments like CDs or bank savings accounts simply don’t provide enough return on investment to keep pace with inflation, especially in today’s historically low rate environment.
- A well-diversified portfolio of equity and fixed income investments, tailored to your goals and risk tolerance level, will help fight against the negative impact of inflation.
3. Consider investing in yourself. You have the power to survive inflation, and you can take steps to deal with it. If you can make your sources of income increase, then inflation will have a lower impact on you.
- Have you considered investing in your future by going back to school or obtaining a certification? These may help you earn more money and increase your cash flow.
- You can also take free classes online or from other organizations. Strengthen your skill set and discover new hobbies that may add to your income.
4. Get rid of debt. As inflation rises, the interest rates on your debts may also rise. If you are in control of your credit cards and other discretionary debts, then you don’t have to worry about it.
Inflation isn’t always easy to predict or avoid. However, you can take action to make it have a smaller impact on your finances. Get a jump-start today to protect yourself, your family, and your finances from inflation’s quiet attack.