Whether you’ve stopped by your local coffee house, bought a new car, or even a gallon of milk, you’ve probably noticed that prices have gone up. Over the past year, inflation has increased at its fastest pace in more than a decade as the economy recovers from the pandemic. Also, Russia’s attack on Ukraine will have lasting and negative effects on the world economy. As a result, prices are around 5% higher compared to a year ago. At the same time, median household income dropped by nearly 3%, the first time in 10 years that the U.S. has experienced such a decline.
The good news is there are ways to fight the effects of inflation without asking your boss for a raise. Here are three strategies:
Negotiate better deals
You’d be surprised how easy it is to find discounts on most things if you simply ask merchants. The first step is building a good relationship with the business and then asking if you qualify for discounts. As a personal example, when I shopped around for carpet installation, I discovered that one business was offering a bunch of additional services — such as free padding and removal of the old carpet — if I hire them in the next two weeks. Ultimately, there’s no harm in asking around. After all, they’re looking to keep you as a customer.
Some common examples of recurring costs that can be renegotiated are insurance premiums, internet/cable bills, gym memberships, streaming services, and your cellular plan. You can also ask about reducing the annual interest rate on your credit cards. Studies show that customers who inquire about lower rates are successful most of the time. This is a great way to save money and reduce your expenses.
Even if you aren’t able to get the price lowered, there are still other perks that they might be willing to throw in for free. For instance, if you buy a new or used car and the dealership won’t budge on their final offered price, you could see if they’ll be willing to offer oil changes either at no cost or at a reduced rate. In addition, if a hotel won’t cut the price of a room, perhaps they would allow you to upgrade for free. In other words, don’t just focus exclusively on the money you’d save, also think about the added value at the same cost.
Postpone major purchases
What goes up must come down. This expression applies to prices as well since many hikes are only temporary. If there are certain big purchases that you can hold off for a while, do so. For instance, if you are looking to buy a used vehicle (the prices of which rose 32% compared to late 2020), it is best to wait until prices go down, as has been the case (albeit slightly) since last fall. One of the reasons why prices were high was because of shortages in microchips, which has begun to recover. As a result, over the next few months we should expect automobile prices to fall even further.
In addition, if you have home improvement projects in mind, it’s best to postpone those for a while. Some of the factors that have contributed to higher prices include scarcity of supplies (including copper, steel, and lumber) and high demand for services. At some point demand for these materials will fall and you’ll get better deals on renovations. However, if something absolutely must be repaired or replaced (such as a leaky roof), this is where things get a bit trickier. In those situations, it’s best to plan well in advance and have a rainy day fund that you can access. The added benefit is that you won’t have to rely on credit cards and the high interest that using them entails.
Diversify your investments
The most effective way to protect your wealth against the adverse effects of inflation is to keep a diversified portfolio. This includes figuring out which assets are best for you taking into account your income level, expenses, risk tolerance, and the period of time you plan to build wealth. If inflation exceeds what you’re earning, you’re essentially losing money. The solution is to invest in a combination of equities, commodities, Treasury inflation-protected securities, and real estate. In the long term, the market is virtually guaranteed to grow based on past performance. Therefore, having all these investments will help you handle anything that the current economic conditions throw at you.