Useful Tips on How to Beat Inflation in 2023

8.6%—that was the size of inflation as of June 2022.

This is the highest inflation rate we’ve seen in the past 40 years. And it’s just the beginning.

But while we don’t have control over the rising costs, there are things we can do to protect our financial future.

Some of our suggestions may surprise you—we cover everything from securities to wine.

So, without further ado, here’s how to beat inflation.

What to Do During Inflation

With record-high inflation rates, it’s normal to worry about your financial stability.

So, before making any rash decisions, you need to take a step back and think.

Re-Evaluate Your Budget

Before you start thinking about what to invest in during inflation, evaluate your current situation.

Start by calculating your monthly income and expenses. What percentage of your earnings do you save and invest at the moment?

Then, imagine the worst-case scenario. The most pessimistic predictions come true, and inflation rates keep rising, reaching a peak at the end of 2022.

Unfortunately, this will affect essential expenses the most. The cost of food has increased by over 10%, energy prices jumped by ​​34.6%, and so on.

The consequences for your budget, at best, will be that you’ll be able to save and invest less in the future. But many people will struggle to make ends meet.

To avoid that, you have two options: spend less or earn more.

First, let’s see how to combat inflation with economization.

Reduce Your Expenses

After you’ve evaluated your budget, you can identify the areas where you could spend less. Start with the discretionary expenses, then look for ways to reduce your food and transportation costs.

If possible, think of ways to reduce your house payment as well. You may be able to refinance your mortgage or find an insurance plan with better terms. And if you’re renting, consider moving to a cheaper area.

Basically, all tips for budgeting on a low income apply here. Here are a few more ideas on how to fight inflation with economization.

Experiment With Meatless Meals

Lately, going to the store costs more than a weekend vacation.

Even if you follow all tips for grocery shopping on a budget—using coupons, planning your meals in advance, buying only what you need—it’s still expensive.

That’s because inflation for food is disproportionately high. It is the highest for meats, poultry, fish, and eggs—over 14% as of May 2022. So, adding more fruit and vegetables to your diet is not only healthy but good for your budget too.

Stock up on Shelf Staples

Another trick about how to prepare for inflation is to stock up your shelf with long-lasting food bought at a discount.

Of course, you don’t want to turn your life into an episode of TLC’s “Extreme Couponing.”

That said, there’s no harm in watching out for discounts on canned food, white rice, and dried beans—things that don’t go bad quickly.

Sure, you can’t stock enough to get you through inflation. But you can have stashes to help you out during hard times. And you can keep restocking them at discounted rates.

Reduce Transportation Costs

Transportation is another victim of high inflation. With an increase in fuel oil costs by a mindblowing 106.7%, owning a vehicle becomes a burden rather than a commodity.

Public transport doesn’t seem so bad now, does it?

Use it whenever you can, bike to work, consider carpooling—anything you can do to reduce transportation costs.

Increase Your Income

Whatever you do to decrease your expenses, the rising costs will outrun you.

So, how to beat inflation?

The most effective way is to increase your income. Of course, that’s easier said than done, but there are plenty of options.

For example, you can start a second job or find a side hustle. Writing, cooking, gardening—these are all hobbies you can make money from. In addition, you can give online lessons or start pet sitting on weekends and after work.

And if you don’t have the time for a second job, focus on building passive income streams. That requires an initial investment, but it can be your safety when your regular income is in danger.

Learn How to Invest for Inflation

When you’re investing during inflation, every dollar saved counts. So, it’s essential to learn how to make tax-efficient investments.

You can do that by reducing the amount of taxes you pay.

With tax-efficient investments, like ETFs, municipal, treasury, and Series I bonds, that’s not a huge issue. They tend to generate fewer capital gains, have tax advantages, or both, so you can make those investments in taxable accounts, like brokerage platforms.

In contrast, corporate bonds, actively managed funds, and stocks paying dividends are not tax efficient. As such, they’re better off in tax-advantaged accounts. These include IRAs and 401ks, among others.

After explaining how and where you can trade, we should also mention what to invest in. We discuss some stocks that do well in inflation historically below.

But before you start investing, you must put your savings in a safe place.

Let’s see what are the best options during inflation.

Where to Keep Your Money During Inflation

Inflation is the biggest threat to your savings.

Interest rates in savings accounts are so low they can’t beat even normal inflation levels. They don’t stand a chance in the current situation.

So, where to put your money during inflation?

Series I Savings Bonds

Many experts recommend keeping your savings in Series I bonds during inflation. They are designed specifically to protect you from inflation.

Interest rates on I-Bonds are adjusted for inflation biannually. While earnings tend to be low, they never drop below zero. So, you won’t get rich, but at least your initial investment will be safe.

Plus, Series I bonds are exempt from state and local income taxes.

Real Estate

Real estate is one of the smart inflation investments. You can either buy a property or invest in a real estate investment trust (REIT).

You can use that as a place to keep your money with potential gains. Sure, the real estate market fluctuates quite a bit, but it has a greater promise for return if you hold on to your property or stocks long enough.

But it has other benefits, too. Renting out your property can be a great source of passive income. And, you’ll pass it on to your children one day, so you’re basically building generational wealth.

These options are the safest, best investments for inflation protection. That said, they’re not the best place for your emergency fund. You should still keep a small amount in an easily accessible account.

Let’s see where to invest the rest during inflation.

What to Invest in During Inflation

Inflation is a threat to your finances. But if you play your cards right, you could make your money work for you.

Although almost everything is in decline during hard times like this, some industries benefit from this situation.

Here’s how to profit from inflation.

Commodities

While most people will lose purchasing power, this doesn’t concern all sectors. Commodities like ​​oil, gold, and base metals have proven to withstand times of crisis.

This makes them possibly the best investments during inflation. They’re a good hedge against inflation, as well as declines in the US dollar.

That said, with the current fluctuations in fuel prices, oils are a risky investment. They may have good returns in the short or even mid-term. You must monitor the state of the market closely and choose the right time to sell.

Consumer Staples Stocks

While the increasing cost of food is bad for consumers, there’s a way to benefit from it. While purchases of luxury goods and discretionary products decrease during inflation, food is not optional.

This gives consumer staple companies the freedom to increase prices and profit. If you invest in this sector now, you’ll benefit from that over the next few years.

Here are some good beverage and food stocks to buy during inflation:

• Coca-Cola (KO)
• Hershey (HSY)
• Kraft Heinz (KHC)
• Campbell Soup (CPB)
• General Mills (GIS)

Wine

In the same vein, one of the most surprising investment tips is here.

When the economy is declining, invest in wine!

The fine wines sector has beaten inflation in G20 economies before. Interestingly, varying financial factors and interest rates don’t seem to influence it much.

If you’re a fan of wine, now you have a great excuse to stock up your basement with a fine selection. Not only will it not lose its value, but it’ll also become more valuable as it ages.

Businesses With Low Capital Needs

If our fine wine advice doesn’t instill trust in you, here’s some expert advice on how to invest during inflation from Warren Buffett himself.

Look for businesses with low capital needs and high potential returns.

Many companies will struggle to maintain their production during inflation. In contrast, those that need little resources to maintain operations could use this to their advantage and increase their gains.

Treasury Inflation-Protected Securities (TIPS)

Our last advice on what to buy before hyperinflation hits is treasury inflation-protected securities (TIPS). Although inflation usually hits bonds the hardest, TIPS are designed to resist economic crises.

How does that work?

The principal increases together with the Consumer Price Index. As inflation rates grow, so does the bonds’ value.

Wrap Up

Inflation is a hard and stressful time for everyone. Your money is losing value in the bank, the stock market is crashing, and prices are through the roof.

Luckily, you don’t have just to stand by and watch it all go south. Read our detailed guide on how to beat inflation and get to work.