Given the current economy in the United States and throughout the world, we are seeing a rise in inflation, the general rise of the price level of the economy, already. As you all know, that means that one dollar today is not worth as much it was one year ago, because the prices of anything you buy (a house, a business, or a gallon of gas) have continued to rise. The main question this leads to for each individual or business is, what should I do to protect myself against this inflation? Here are a few ideas:
- Raise Your Prices. Each business has already started to raise their prices in order to make sure that their income remains the same, because their expenses are continuing to rise because of inflation. This is particularly true with regard to the costs of oil and gas, as we have seen in the spring of 2022. Prices for gasoline have gone up around eleven percent (11%) just in the month of March, and while this inflation may recede at some point in the future (perhaps at the end of August 2022), an increase in prices must be put in place to make sure the business is still profitable.
- Retain Assets that Increase in Value. One of the best ways to ensure that your income and assets retain and increase in value during this period of inflation is to make sure any investments you make are in certain assets, like valuable metals or real estate, that almost always rise in value over time. Real estate is a perfect example of this; just one is example, if you purchased a house in Sioux Falls in 2018 for $475,000, it would now be valued at $690,900, which is an increase of over thirty-one percent (31%) over just three (3) years. This is particularly true in Sioux Falls, where housing prices have risen fifteen and seven-tenths percent (15.7%) over the past twelve (12) months!
- Limit Expenses When Possible. Given the rise in prices in the United States because of inflation, it is always a good idea to focus on limiting one’s expenses as much as possible. Focusing on business efficiency and utilizing technology are two ways to limit expenses and allow for more potential income even during a period of rising inflation.
- Be Aware of Rising Interest Rates. One of the main ways that we know there is current inflation is the recent raising of interest rates on loans. Recently, the Federal Reserve raised interest rates on one day higher than such rates had been raised in over twenty (20) years! The Federal Reserve indicated that this was done because inflation in the United States was becoming much too high, and consequently interest rates needed to be raised. It is highly likely that these rates will continue to rise in the next twelve months, so to the extent possible it is best to only take out any loans you absolutely need, as the last thing you want is spend more of your income on interest during this period of inflation.