It’s been a really strange year-and-a-bit. We’ve had a once-in-a-lifetime pandemic. Our realities were toppled over. It was almost like we were living in a movie. Except this was (and still is) our reality. We then saw the most unprecedented global stimulus package. Ever. The Fed alone printed $5 trillion. This means that every 1 in 5 dollars sloshing around was created during the pandemic. Crazy. All of this money-printing and stimulus stuff had some pretty wacko consequences. And the most striking of all was that asset prices began to inflate, like a bunch of balloons.
Now we’ve got many asset classes (from stocks to houses) sitting at record-highs. Talk about walking on eggshells! And all of this wealth had to go somewhere. So, the rich got richer as assets got pricier. But it also looks like (almost) everyone is out there spending. As much as they are getting wealthier, despite inflation which has been quietly on the rise. Read here why nothing (not even inflation) is stopping these shoppers.
Two sides
At the minute, inflation is loud and you’ve gotta be living under a rock not to hear it, see it and feel it. Inflation was, of course, an unplanned consequence. You could argue that it’s mainly down to supply chain shortages. That if companies are struggling to get their stuff to consumers (us) in time, there’s less stock to go around which leads to rising prices.
But I reckon that all this money-printing had to have played at least some part in this inflation narrative. See, back in ’08 when we experienced the ugly Global Financial Crisis, most of the printed money stayed in the banking system. But now it’s leaked into every nook and cranny.
After all, this was a health crisis not a financial crisis. And economies needed to be propped up to prevent them from diving into a depression (which we all wanted to avoid!) but this meant that there’s now much more money out there chasing fewer and fewer things. And, voilà , say hello to inflation which, by the way, has reached 6.8% in the US and 5% in the UK. Whichever way you look at it, it ain’t pretty.
Push back!
See, when prices go up this much, your money buys you a whole lot less. You’ll see (if you haven’t already) that it ain’t quite as stretchy as it was pre-covid. When it used to be able to buy a whole bunch of stuff for a tenner. Now it barely covers the basics. Here are 5 of the best and most underrated ways you can start making money to put back some of the power back into your purchasing!
Prices are rising. And fast. The fastest annual rise in 40 years. Yowch. So we know inflation’s here. We can see it and we can certainly feel it! Read here what’s is doing to the price of our #1 beverage and what that means for you. Now, we can either sit back (without relaxing) and moan about it. Or we can wait for the Fed (and other central banks) to get their act together. Which ain’t gonna happen overnight. Some are still hoping (more like praying) that inflation is still transitory but to be honest I don’t really wanna wait and see. Though, the Bank of England has already raised rates. read here why they’ve done it and why others haven’t – yet.
Let’s take matters into our own hands and figure out a way to claw back some of our precious purchasing power. Because this one we ain’t gonna be losing.
#1 Make do with less
This isn’t about living a super frugal existence. No way. I mean, if that works for you – awesome! But for most people it doesn’t. Yet this doesn’t mean we can’t channel our inner minimalist and take a leaf outa the frugal folks’ book.
Making do with less means something different to everyone. For some, it’s dining out less often and for others (me!) it’s not shopping online as much. Figure out what works best for you and get doing it.
It’s also a really good habit to get into. To be able to say No to what you want. Sacrificing short-term pleasures for long-term rewards is the surest way to boost your overall returns. It ain’t easy, but boy it’ll be worth it. Read here about 3 things you could live without to boost your bank account and your wellbeing. Less really is more.
How this manifests for me is that I’m trying to slow down on buying things (like that gazillionth new jumper) that I know I don’t really need. I wanna get into the habit of wearing my stuff for longer and properly enjoy them rather than hopping onto the next thing. During lockdown I realised I had a cupboard full of serious stuff. After not wearing them all for more than a year, they felt new again. There’s something really satisfying about actually wearing your clothes. Till they grow old. So try it!
#2 Invest yo money
This one’s the biggy. By investing your money that’s how you’ll stand the chance to beat inflation. More risk means the chance of more reward. Markets are risky. Especially now with many of them (cough, cough S&P 500) trading at all-time-highs.
In the short-term, all this volatility is the price we’ve gotta pay for long-term gains. If you’re investing for your future, if you’re in it for the long-run, then just press mute. Get all this noise outa your head. Because, if you start paying attention to it, you can lose a lot. The deafening noise can cause you to panic. To be thrown off-course. All those years of patience can literally be wiped out in an instant.
By investing on a regular basis, blocking out the noise and sticking to your plan is the best way to survive all this. But if you’re uneasy about investing right now (I seriously don’t blame you), you could always build up a cash pile. For when markets take a tumble. That way you’ll be able to act. Fast.
So be patient, and let compounding works its magic. But be careful not to interrupt it. ‘Cause that would hurt.
#3 More income
While investing can help boost the value of your money, adding some more income streams can really help, too. There are loads of ways in which you can earn extra income so try them out and see what works for you.
The first is through dividends. This is when companies dish out a proportion of their profits to shareholders – You and I! It’s usually shown in percentage terms. So say the share price is £50 and they pay a 5% dividend yield, this means each year you’ll receive £2.50 in dividends. If you own 100 of these shares, your annual dividend will be £250. If you invest through an ISA then you aren’t taxed on your (dividend) income nor are you taxed on your profits.
You could also start your own biz! This can literally be anything. It can be tutoring/freelancing/photography/baking whatever you want really. As long as you enjoy it and it can offer you the chance of earning some extra income, I say go for it. Beginnings are always hard and you probably won’t make much at first but you gotta stick at it. That’s when real results take place.
While inflation ain’t fun, it’s the wake-up call we probably all need to start taking control and putting measures in place to ensure our money is working for us.
If you don’t act, inflation will act for you. And trust me, no one wants that.
So go on, beat that thing!
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
Knead Your Dough 