How to beat inflation

The Nigeria Bureau of Statistics (NBS) published an inflation report sometime in May 2022 stating that the inflation rate in Nigeria has moved to 17.71%, which is the highest in 5 years. 

The increase in the inflation rate has a transversal effect on the purchasing power of Nigerians in all sectors of the economy: transport, energy, construction, tourism, industry, insurance, pensions, wages, real estate, housing rental, taxes, etc. That’s why a lot of Nigerians keep complaining every day even about the price of essential commodities and services.

But when is this going to end? That’s a hard puzzle to solve because as long as we continue to have bad governmental leadership and policies, the general increase in energy prices all around the world, and other factors, it’s sure that the rate of inflation will keep increasing.

However, don’t panic, there are things you can do to always beat inflation. Everything is summarized in planning consumption, savings, and investment decisions well.

So, what can you do to cushion the impact of inflation on your finance? You’ll find out in this article.

Ways to beat inflation

Here are ways to beat inflation:

1. Invest

This is a major way to beat inflation. Price increases eat up spending power and they also make savings lose purchasing power by eroding their value, especially if they are in bank accounts with no or little remuneration. 

To beat inflation, your savings must rise in the same proportion to cover the potential losses generated by inflation. Here are some of the assets you can invest in to outperform inflation:

• Gold investment

Gold is one of the safe investments known to have the capacity to outmatch inflation. When the stock market falls or there is uncertainty, many investors look towards this precious metal.

Gold serves as a protection against moments of inflation and high volatility and it performs very well when it comes to protecting your capital in bear markets.

• Real estate investment

Real assets are a good hedge against inflation. If you want to invest in real estate, you can buy a house to rent or you can look for investment companies specialized in investing in real estate for rent.

You may also like: Investing in Real Estate: The Pros and Cons

Another formula is to go to real estate crowdfunding, with which you will be becoming the owner of a small percentage of a property together with other savers.

• Raw Materials investment

One of the sectors that traditionally do well when there is inflation is raw materials. In the end, raw materials tend to pick up the price increase.

The value of commodities increases with inflation and raw materials like metals are one of the most demanded and least supplied commodities.

• Stock market investment

The stock market is still one of the best investments to beat inflation. It involves purchasing a portion of a company.

For it to work out, the first thing you have to do is study what the company is, how it works, what its results are and the potential it has. Of course, investing in stocks has a lot of risks. However, if it goes well, the return can be very high.

Also read: Guide to stock investment in Nigeria

• Digital currencies investment

Buying cryptocurrencies is something that sounds attractive to combat inflation. However, one of the drawbacks of investing in cryptocurrencies is that they are classified as high risk due to their volatility. 

One of the tips given when investing in digital currencies is to not invest more than you are willing to lose.

Also read: How to start investing in Bitcoin in Nigeria

• Mutual funds investment

Mutual funds diversify your money by buying shares of both national and international companies. It’s ideal for fighting inflation.

One of the advantages is that the availability of money is guaranteed at any time. Of course, the profitability of these investments is not usually very high.

2. Moderate debts

Another way to combat inflation is to speed up the amortization of your pending debts and not contract new ones.

This is because, in an inflationary period, interest rates increase more than normal.

3. Cut superfluous expenses

Some expenses cannot be avoided, but there are others that, without realizing it, are making a dent in your finance. They are unnecessary expenses that, if not well controlled, considerably reduce your current account.

You must analyze what expenses you have and which ones are expendable and avoid whims in these inflationary times.

4. Reduce energy consumption

It is difficult to live without electricity, gas, petrol, etc, but these expenses can be reduced. In the case of the electricity bill, it is necessary to check that the contracted power corresponds to the needs of your home. 

Also, in the case of petrol, take your car less, but take public transport often, especially on short journeys. Be efficient at home with electricity consumption: use energy-saving appliances and use them only when it’s necessary.

5. Negotiate income increases. 

The current situation where prices rise higher than wages and we suffer a clear loss of purchasing power is a good argument to demand a salary raise from your boss to adjust your wages to the new inflationary situation.

If your boss refutes it, you can test the waters in other companies. 

6. Explore new sources of income

Finding a way to earn more money daily, weekly, or monthly is also one of the sure ways to counter the adverse effect of inflation on your purchasing power. These are some of the things you can get started with. 

• You can start selling stuff like fashion and beauty items, gadgets, etc on social media.
• You can learn a digital skill like graphics design, programming, etc, and monetize the skill. 
• You can get a part-time job and work when you’re free.
• You can start publishing books and photos on platforms like Amazon and Etsy.
• You can start online coaching if you’re good in any field.

Conclusion

Now you know different ways how you can fight inflation. All you have to do is select one of them and put in all the effort required.

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