“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” Ronald Reagan
MAIN TOPIC: Inflation is Upon Us
Take a look at the charts. The first one lists the annual inflation rate for 1975 to 1986. From 1975 to 86, inflation ranged from about 2% in 1986 on up to 13.58% in 1980 and a cumulative 110.36% for the ten year period.Now, take a look at the inflation rates from 1975 to 1986 (in the second chart) and compare them with those of this last decade! The cumulative inflation rate of this past decade is a paltry 28.37%. Big difference! If you bought a $50 item in 2000, factoring in the rise in inflation, that item would cost about $64.19 this year. And many goods such as Asian imports and electronics have actually declined in price.
Compare recent inflation with that from 1975 to 1986 where a $50.00 item purchased in 1975 would cost $105.20 in 1986. Now, that is a huge difference. Although you may not be thinking much about inflation now, you should be.
Practical Application; Inflation Busting Strategies
When I was a little girl, my mom bought huge amounts of toilet paper, canned goods, and other non-perishable items on sale and stored them in the basement. Although it was annoying to hunt down a roll of toilet paper in the basement; now I totally get it. During those times, with increasing inflation, buying large quantities on sale was a true inflation hedge! Recently, many individuals wait for items to drop further in price before purchasing. With high inflation, don’t wait to buy an item, if the price is good.
Begin developing inflation busting strategies now and you will be better equipped to cope with the almost certain future price increases.
Consider these shopping and investing tips:
- Stock up on sale commodity items. With cotton prices sure to rise, clean out the Hanes aisle during their underwear sales.
- Don’t forget the towels and sheets during the annual January white sale.
- Paper towels, napkins, toilet products etc. are other products to stock up on when on sale.
- Think of other non-perishables to buy in bulk.
- Avoid buying bond funds now! With interest rates sure to rise, the principal value of the fund will decline as interest rates rise.
- Keep a diversified portfolio, as the future is uncertain. It won’t protect you from market declines, but with diversification, when one investment class falls, another may increase.
- Pick up my 20 Minute Guide to Investing for time tested investing strategies in an easy to digest ebook.
Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.
- Make an effort to buy in bulk when prices are low on standard items. (But don’t overbuy items you don’t need!)
Caveat: This article is for information purposes only and may not be appropriate for your individual situation.
What inflation busting recommendations do you have?