Update 17/07/2024: the end may be in sight, with the latest CPI data showing inflation has dipped to a 3 year low:
How to Weather the Storm: Dealing with High Inflation
Inflation, the relentless rise in prices, can feel like an unwelcome houseguest, making it harder to stretch your dollar. But fear not! While it's a challenging economic climate, there are practical steps you can take to protect your finances and maintain your lifestyle. Let's dive in.
Understanding the Beast: What is Inflation?
Before we tackle the problem, it's essential to understand what inflation is. Simply put, it's the decrease in purchasing power of your money over time. This means that your dollar buys less today than it did yesterday. Factors contributing to inflation can include increased demand, supply chain disruptions, and government policies.
Protect Your Purse: Practical Tips
Budget, Budget, Budget: This might sound like old news, but it's more crucial than ever. Track your income and expenses meticulously. Identify areas where you can cut back without sacrificing essentials. Apps and online tools can make budgeting easier.
Embrace the Power of Saving: Even small amounts saved regularly can add up. Consider high-yield savings accounts to maximize your money's growth. Remember, saving is your shield against unexpected expenses.
Tackle Debt Aggressively: High-interest debt is a double whammy during inflation. Prioritize paying off credit cards and personal loans. Consider debt consolidation options if you're overwhelmed.
Diversify Your Income: Explore additional income streams. Freelancing, side hustles, or rental properties can provide a financial cushion.
Shop Smart: Be a savvy consumer. Compare prices, look for discounts, and buy generic brands when possible. Consider bulk buying for non-perishable items.
Invest Wisely: While inflation erodes the value of cash, investing can help your money grow. Consider options like stocks, bonds, or real estate. However, always consult a financial advisor before making significant investment decisions.
Cook at Home: Dining out can be expensive. Preparing meals at home is often cheaper and healthier.
Reduce Energy Consumption: Conserve energy by adjusting your thermostat, using energy-efficient appliances, and reducing water usage.
Seek Support: If you're struggling, don't hesitate to reach out for help. Financial advisors, government assistance programs, or community resources can provide guidance.
A Long-Term Perspective
While inflation can be frustrating, it's essential to maintain a long-term perspective. Economic cycles fluctuate, and things will eventually improve. Focus on building financial resilience, and remember that small, consistent steps can lead to significant results.
By implementing these strategies, you can take control of your finances and weather the storm of inflation. Stay informed, be patient, and remember that you're not alone in this journey.
The above blog was written by Reid Mckenzie a financial adviser working for Mckenzie Financial Planning (www.mckfp.co.nz).
The above information is general in nature as is not meant to constitute personalised financial advice. Reid recommends seeking personalised financial advice from a registered financial adviser before making financial decisions.