Saving money can be difficult for many people, especially with inflation now glaring the economy down. Steep housing prices mixed with increasing interest rates makes for a perfect storm when trying to buckle down and budget.
Along with a change in prices, inflation can affect savings and how much you need to put away for unexpected financial emergencies. A good emergency savings fund should have enough money to cover three to six months of living expenses. But over time, if your expenses increase because of inflation, the amount you need to put away should increase, too.
If you’re concerned about protecting your money, here are a few options to help combat this period of rising inflation.
- Transfer Savings To A High-Yield Account
The role of short-term savings is to provide easy access to your money when you need it, not necessarily to keep up with inflation. It’s important to add up your monthly expenses on a regular basis and compare the total to how much you have saved. Setting up automatic deposits to a savings account is a great way to make sure you are constantly contributing without thinking about it.
- Buy, Don’t Rent
During inflationary periods, the market tends to lean in favor of buyers over renters. Renters are at the mercy of landlords, who are often obligated to adjust the price of rent next to the level of inflation. However, as a homeowner, your payments are fixed and the value of your home continues to increase with time.
- Refinance Your Home
If you are currently a homeowner, this would be an ideal time to refinance your home and take advantage of the low interest rates before they spike. This will save you thousands of dollars over the course of the loan, and grant peace of mind knowing you are locked into a great rate.
- Invest In Stocks
If you are looking for ways to make your extra money work harder against inflation, consider using stocks to generate long-term savings. There is no guarantee that future earnings will continue to match the current rate, but even so, investments can be your best bet for earning long-term returns that challenge inflation. If you are saving for retirement, investing in a 401(k) or IRA are great options that can also add valuable tax benefits, too.
You can’t control inflation, but you don’t have to let it dictate your savings, either. Be smart about where you put your money, keep an eye on your expenses and you can reach your savings goals without missing a beat. If you are looking to purchase or refinance, please give Bluefire Mortgage Group a call at (760) 930-0569 and one of our loan officers will assist you.