Wealth Creation: Top 5 Ways Investors Can Manage Money in Times of Rising Inflation

inflation jumps to the sky! According to the latest data released by the government, India has recorded the highest inflation in 8 years. From April 2022, CPI inflation rose to 7.79 percent. This means that prices have never been higher in the last 8 years than they are now.

Slowly and steadily we saw inflation creeping into our households, and one fine day we thought and wondered, “How has my spending increased so much?”

First, it is important to understand what inflation is.

Inflation is simply a rise in the prices of goods and services. It is increasing day by day, as is your cost of living. According to government data, it is 7.79 percent, which is calculated in view of the basic needs of the individual.

However, if you are a person who spends money on eating out, buying plane tickets, sending your children to study in private institutions or dreaming of having a luxury wedding, inflation for you can be over 10 percent, because it all falls in the luxury category.

Therefore, your savings need to grow more than that to maintain your current lifestyle.

If we look at what caused the rise in inflation, there are many factors to consider, including excess liquidity in the market, COVID-19 restrictions, rising fuel prices, the Russia-Ukraine war, and the overall mismatch between supply and demand. market.

As a result, the current situation and the way it will continue in the future is something we all need to know and prepare for in order to deal with it better.

So here are some ways to manage your money in the face of rising inflation:

1. Reduce unnecessary costs:
Make a list of everything you spend on, and then differentiate between your needs and desires. Needs are things you use regularly, such as food, groceries, and other things necessary for your survival and basic existence. Desires are things you buy for your comfort or luxury – like going out to dinner, home delivery, going to the movies and the list goes on. Now your task is to go through all this to find out what meets your needs and desires. In times of rising inflation, this exercise will help you identify ways to save and manage your money effectively.

2. Be smart with your budgeting:
It’s time to reevaluate your spending plan and get back to the basics of budgeting. According to the Women & Money Power survey conducted by LXME, 73 percent save less than 20 percent of their income. The 50:30:20 rule ideally distributes 50% of your income for needs, 30% for desires and 20% for savings and investments. Therefore, following this rule will help you keep track of your expenses and maintain a Budge. One piece of professional advice here is that while earning your income, save at least 20 percent of it first and then spend it. Helps instill the habit of saving and a disciplined approach to money management.

3. Examine each cost item and look for better deals or offers:
As inflation puts pressure on your portfolio, it is important to look for better deals and offers when making a purchase. All of this, including rewards and refunds, are some ways to help save that extra rupee.

4. Maintain an emergency fund:
As inflation rises, you may need to spend extra money to manage your spending. Then you may not want to take out new loans because the cost of the loan is high. Or even immerse yourself in your long-term investments, as this would distract you from your financial goals. That is why it is important to have an emergency fund that is at least 6 months out of your expenses and is quickly and easily accessible when an emergency arises.

5. Invest in stocks for your long-term goals:
According to the Report on Women and the Power of Money 2022, 49% of women invest in traditional instruments. Given the current scenario of rising inflation, and despite the fact that interest rates on interest rates have risen due to rising repo rates, they will not be able to generate long-term returns that exceed inflation. If you have long-term goals, make equity your friend, because it is a class of assets that create value. You need to include it in your portfolio to get a staggering return on inflation and create wealth. For starters, mutual funds are the easiest way to get exposure to stocks. Finally, before you do anything investmentit is important to determine your goals, risk appetite and time period of investment and then decide for yourself.

Let’s build better money habits and make smart moves so you can deal with inflation and manage your money efficiently.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. They do not represent the views of the Economic Times)

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