So if you have not noticed, the price of just about everything is going up…while our salaries are staying the same. Some say recession, some say depression, some say all is fine. But no matter what the reason, times are getting tougher. Hospital costs are up 8%, gasoline 33%, overall prices on everything 4%. But according to Money Magazine, there are three rules to follow in times of inflation that could ease the pain:
1. You can actually lose money by saving money. Yep, you read that right. With a 4% inflation rate, interest paying accounts like CD’s at 1.97% a year and money markets at 3% or so, could be costing you up to 2% of your money a year before taxes. Their advice? Keep bond and CD maturities short.
2. Stuff beats paper assets – on paper. When inflation is high, goods like gold, silver, oil, art, and wheat tend to have an edge over securities, especially bonds. People think they have intrinsic value over paper money, so their value tends to go up. But how realistic is that value?
3. Fixed-rate debt is your best friend. Why? You repay a fixed number of ever-cheaper dollars. Stick with regular mortgages or car loans, but avoid credit cards, ARM’s and HELOC’s, which can have their rate changed.
So other than the tips that Money has, what kind of things are you doing in these strange times?