Skip Navigation Download Acrobat Reader 5.0 or higher to view PDF files.

Protect Your Money During Inflation

With inflation on the rise and a possible recession looming, now is the ideal time to start thinking about how you can better protect your money. Markets shift constantly, but inflation can creep up on us all, slowly eroding the purchasing power of your money.

While there are no guaranteed methods to hedge against inflation and keep your money safe, there are certain strategies that you can use to keep your purchasing power intact and even save a little extra.

What is Inflation?

Inflation is an economic term that refers to the overall increase in prices for both tangible goods and services. The Consumer Price Index measures these changes over time as an annual percentage.

While many people immediately associate inflation with negative movement in the market, it isn’t always bad. Some level of inflation is essential for a stable economy. But excessively high inflation can cause problems for both consumers and businesses as goods and services become more expensive, with real wages not rising at the same rate to make up the difference in costs.

Who Benefits from Inflation?

It is possible to benefit from the overall impact of rising costs and inflation. For homeowners, inflation means that people pay more for housing and property values typically increase. If you are looking to sell your home, this could be a good time to consider it.

People with fixed-rate debt can also benefit from periods of inflation. When the rate of inflation exceeds the interest rate on a loan, the cost of borrowing decreases. If you are one of 51% of homeowners with a fixed rate mortgage under 4%, your debt is actually decreasing in value as inflation continues to rise.

For those with federal student loans, inflation can also work in your favor. These loans are always fixed rates and so stay the same over the lifetime of the loan. Just like with mortgages, if inflation exceeds the interest rate on your student loan, your debt holds less value.

Six Ways to Protect Your Money

1. Trim Your Expenses

Scaling back on your outgoings is unlikely to save you a significant amount of money. But even the smallest amount can help make your money go further, especially if you focus on making multiple small cuts that can add up.

From April 2021 to April 2022, egg prices rose by nearly 23%, with chicken and beef up over 15%. Vegetables, on the other hand, have only increased by 6%. With overall inflation around 8% for 2022, fresh fruits and vegetables are actually cheaper overall than many other food options. Switching to a more plant-based diet, at least on a couple of days in the week, can save you money on your grocery bills.

Streaming services and subscriptions are also an area of your budget to look at. Netflix recently announced a new ad-supported plan for $6.99 a month, instead of the current ad-free version at nearly $15 a month. Switching to this alternative plan could save you over $150 a year.

2. Create and Stick to a Budget

Making a realistic budget and sticking to this is a critical step in finding financial stability. Knowing what money you have coming in each month and where that’s going means that you can continue to save throughout periods of inflation.

If you’ve never made a budget before or are looking for some additional ways to save money, Wheatland Bank is proud to offer free financial education resources to members of the community. Financial literacy should not be complex and should always be accessible to everyone. We are pleased to be able to provide this education to help you grow your financial knowledge.

3. Remove Variable Rate Debt

Variable debt rates typically follow those of the federal funds rate. As the Federal Reserve continues to increase their rates, you can expect to see interest rates on variable products like credit cards and loans increasing too. Which ultimately means you’ll be paying more for this debt.

If possible, try to pay off these debts as soon as possible or refinance your debt into a fixed rate loan. This will make your monthly payments fixed, rather than variable, which makes budgeting easier and could potentially save you money over the lifetime of your loan.

4. Wait to Pay Off Low Interest Debt

Paying off any debt is never a bad idea, especially those that have high interest like credit cards. But if you have a low interest debt, like a mortgage or personal loan, this is the time to consider whether your spare money would be better invested in a high yield savings account or another form of risk-free investment. Particularly if these low interest debts have fixed rates, any additional funds you have should be used to keep your budget on track rather than rushing to remove these debts from your life.

5. Save Assets That Maintain Their Value

Real estate assets don’t come without risks, but these have historically increased in value over time, especially during years of inflation. However, this type of investment does require a significant amount of cash up front, so it’s not something to rush into.

If you do not have the funds right now for a down payment for a rental property, consider investing in Real Estate Investment Trusts (REITs). These are companies which own and operate income-driven real estate on behalf of a pool of investors, who receive dividends on any income earned on that property.

Other investments like precious metals, commodities, a broad market index fund or the U.S. Treasury Bond are also options to consider. There is always some risk with investments, so it’s best to speak with an expert before making any decisions. But maintaining a diversified portfolio helps limit your exposure to a single asset class and the possibility of losing your money should that asset become threatened.

6. Open High Interest Savings Accounts

Investing can make you a significant amount of money, but it does come with risks. If you’re looking for more risk-free options, consider a personal savings account with a guaranteed return.

Certificates of Deposit (CDs), money market accounts and high yield savings accounts are all an excellent alternative to investing in the stock market. They offer guaranteed rates of return and are insured by the FDIC up to $250,000.

Some options like CDs will lock your money into the account for a set length of time, while high yield savings will typically let you have access to your savings as and when you need them. Because of this, interest rates will vary, so research different options before making a final choice.

Take Control Over Your Financial Future

No one knows what is going to happen in the future and periods of inflation can be scary. But there are plenty of ways you can protect your money and feel more in control of where your hard-earned cash is going.

The team at Wheatland Bank are here to support you with your financial needs, whether that’s opening a new checking or savings account, to refinancing a home loan to take advantage of a fixed interest rate. Ranked among the top 10% in the nation for financial strength, Wheatland Bank has proudly supported customers since 1979. Contact us today with any questions about your current financial status or to discuss the different savings options available to you.