Five ways to beat the inflation blues

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Inflation is the rate at which the price of goods and services rises over time. When inflation is high, your hard-earned rands don't stretch as far, and you end up paying more for the same stuff. 

Here’s how inflation might affect your financial plans – and how you can adapt accordingly.

Interest rates. When inflation starts to climb, the Reserve Bank often responds by hiking interest rates to keep prices in check. What does this mean? If you have a good amount of money in your savings account, a higher interest rate means you’ll get better returns. (Yay!) But if you have a bond or another big loan, the higher interest rate means your debt just got a whole lot more expensive. With that in mind, if you’re shopping for a new car or thinking about buying a house, rising interest rates might put the brakes on your plans. 

Cost of living. One of the most obvious impacts of inflation is its negative effect on your purchasing power. That R1 000 in your underwear drawer? It's not going to buy you the same quantity of groceries or fuel as it did a few months or years ago. Inflation can impact long-term financial goals like your retirement savings and other investments, as their real value may decrease. 

Take these steps

1. Build an emergency fund. A robust emergency fund is your first line of defence against unexpected expenses. Aim to save three- to six months' worth of living expenses in a high-yield account to cushion the blow of any financial shocks. Need more info – read this article.

2. Invest wisely. The old adage rings truer than ever: don’t put all your eggs in one basket. Diversify your investment portfolio to include assets that might provide a buffer against inflation, like equities or property. These assets have historically outpaced inflation over the long term, helping to preserve your purchasing power and grow your wealth.

3. Budget like a boss. This is where 22seven can save your bacon. Use the app to identify areas in your budget where you can cut back on spending and add more to your savings. Trim the fat and make sure your month-to-month priorities align with your long-term goals.

4. Pay off debt. Say it again, this time with feeling: PAY OFF DEBT! High-interest debt like credit cards, store cards and personal loans can be a real drag on your finances, especially if inflation pushes up the interest rate. Need help? Read this.

5. Stay informed. Don’t be an ostrich with your head in the sand. Keep an eye on the news and stay informed about inflation trends. It might also be time to take that big step and chat to a certified financial planner who can help you plan for your retirement and get started with things like an emergency fund and a tax-free savings account. 

Inflation can be a real headache, but it doesn’t have to derail your financial goals. With a bit of foresight, planning and money management, you can tame the inflation monster and keep your plans on track.