5 Ways To Protect Your Wealth Despite Rising Inflation

If you’ve recently filled up with petrol, made a home loan payment or done your weekly grocery shopping, you’d have noticed that everything is costing more these days, even though your salary has probably remained the same.

If you’ve recently filled up with petrol, made a home loan payment or done your weekly grocery shopping, you’d have noticed that everything is costing more these days, even though your salary has probably remained the same. This high-inflation environment is putting many consumers under strain and forcing them to re-evaluate their spending, saving and investment strategies.

When the Reserve Bank raised SA’s interest rates by 0.75% in July, the biggest hike since 2002, it signalled that we’re officially in an era of rising interest rates, compared to the lower rates of the COVID pandemic.

The Reserve Bank’s announcement came days after data showed consumer inflation now stands at a 13-year high of 7.4%, driven by surging fuel and food prices. Oil prices remain stubbornly high at over $100 a barrel and the fuel price is expected to spike by nearly 40% this year alone.

An imbalance in the forces of supply and demand is usually behind inflation. What makes the current inflationary environment unique is that the economy is under pressure from both sides. On the supply side, there have been COVID-induced supply-chain disruptions, made worse by the war in the Ukraine and staffing challenges caused by the Great Resignation, while on the demand side, there’s been a slight increase in consumer purchases, fuelled by lower lending rates.

Price hikes can put a lot of pressure on consumers and make them feel anxious about their financial future. According to the credit agency TransUnion, 56% of consumers say they won’t be able to pay at least one of their current bills or loans in the next three months. Rather than letting financial anxiety get the better of you, here are five ways you can preserve your wealth in these trying times.


1. Do A Monthly Budget

This may sound elementary, but given that costs are rising, you need to keep track of how much you’re spending on important items every month. If you’re shopping at a high-end grocery store, you might want to switch to another that’s more affordable. You could also consider cancelling subscriptions that could be considered as luxury items.

2. Pay Off Your Debt

Those with debt are always harder hit in a high-inflation, high-interest rate era. Rather than waiting till the end of the month to make credit card repayments, pay in as much as possible at the start of the month. Bringing your debt under control should be a top priority, as the interest rate on a credit card can be as much as 17.5%.

3. Start An Emergency And A ‘Buy-Bulk’ Fund

Speaking of debt, it’s a good idea to start a rainy-day fund, so you don’t need to go into the red when your geyser or your car breaks, or you have a dental emergency. Aim to save between three to six months’ worth of living expenses, which can be easily accessed. In addition, in a separate account, in inflationary times it’s also worth building up a ‘buy-bulk’ fund so you don’t have to dip into your emergency fund to make smart bulk purchases of grocery items before their prices go up (again).

4. Do A Price-Check

If you do need to make an expensive purchase, first do an online price comparison to make sure you’re getting a good deal. And remember that sometimes, such as in the case of insurance premiums, advice fees and many other professional fees, the price is negotiable. 

5. Choose Inflation-Beating Investments

Despite rising inflation and market volatility, now is not the time to make drastic changes to your investment strategy. Remember that investing is about time in, rather than timing the markets. The stock market remains a good way to protect yourself against long-term inflation, because good companies can adjust their prices along with inflation. Nowadays, it’s easy to access the stock market through ETFs or unit trusts investing in equities (listed companies).

If you haven’t yet begun your investment journey, don’t be put off because market conditions are not ideal. Every contribution towards wealth creation, no matter how big or small, makes a difference, especially when you add the magical ingredient of compound interest. By regularly evaluating your investments with your financial adviser, you’ll be able to offset any anxiety concerning your wealth and feel more confident about the future.



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