15 Ways Consumers Can Deal With (and Even Benefit From) Rising Inflation, Ep #249

Inflation is weighing heavy on the minds of retirees right now, so when I came across this article on WSJ.com from Cristin Lourosa-Ricardo, I knew I had to share it with you. Listen in to try and find the silver lining of inflation.

If you are a financial advisor fan of this show, make sure to stick around until the very end for a special announcement.

Outline of This Episode

[1:38] How to lessen the impacts of inflation
[5:19] Why you should buy the car you’re leasing
[9:00] Control lifestyle creep
[14:34] How to balance a portfolio in this economic climate

15 ways to combat inflation

After 7 straight months of inflation being over 6%, it’s no surprise to anyone that the current rate of inflation is 8.3%–a 4 decade high. Although the Fed is using fiscal policies to begin to alleviate the inflation burden, it is important to find practical ways to deal with inflation at home. Let’s look at 15 ways that consumers can combat inflation.

Consider your personal inflation rate. Observe where you spend money to analyze where inflation impacts you the most. This can help you understand where to cut back your spending.

Be aware of shrinkflation. Joseph Hogue and I discussed this recently in episode 247. Shrinkflation is a tool that companies started using in the 70s to hide the effects of inflation. Companies use shrinkflation to package products to deliver less of a product at the same cost. For example, your typical 12 ounce package of coffee may now contain 10 ounces for the same price. To combat shrinkflation consider buying generic or simply sticking to fresh foods as much as possible.

Delay Social Security. You have certainly heard this tactic on Retirement Starts Today before. The longer you can delay Social Security the higher your inflation-adjusted income will be.

Purchase the car you’re leasing. This is a tip I hadn’t heard before but it makes sense. By purchasing your lease you can avoid the current high auto costs. New car prices have risen 13.6% and used car prices have increased 34.7% since March of 2021. Since your vehicle’s lease-end purchase price was set when your lease began, it will be unaffected by these increases. Even if you don’t love the car, you could turn around and sell it at a profit.

Seek a higher return on happiness. Take a close look at your monthly spending and cut out the costs that don’t bring you joy–think of this as a way to Marie Kondo your budget.

Ask for a raise. Now is a good time to ask for a higher raise. The state of the labor market is on your side!

Time your expected purchases. Take advantage of sale prices whether you need the item at the time or not.

Don’t add explicit inflation protection. Since inflation is already in full swing this is not a good time to purchase TIPS or gold. The Federal Reserve is actively tightening monetary policy, so, at this point, these tactics won’t help.

Control lifestyle creep. Try to keep your household expenses flat rather than having them rise with inflation. This means that you may need to trim the fat a bit. Look at your budget to see where you can cut expenses with minimal impact on your lifestyle.

Account for shadow inflation. Watch out for spending on things that used to be free like bread and butter or chips and salsa at restaurants.

Buy inflation-indexed stocks. Make sure that your portfolio includes established companies whose revenues are tied to inflation rates. Listen in to hear my thoughts on this idea.

Watch for falling prices. Capitalize on the current market environment by buying stocks at a discount.

Invest in alternative energy. Spikes in energy and food prices due to the war in Ukraine have driven countries to limit their dependence on foreign fossil fuel resources and have led to increased investment in clean energy sources.

Better insulate your home. Your power company may provide a free energy assessment on your home which can help you understand how you can improve your home’s energy efficiency. Upgrading the energy efficiency of your home may cost you now, but you will see long-term returns on your investment if you plan to live in your home for several years.

Which of these tips did you find the most relevant to your situation? Listen in to hear my thoughts on these ideas.