High inflation: How to defeat finance’s most powerful enemy

You can’t ignore inflation! There is no entity on earth that can withstand its power. It erodes wealth over time. It respects neither central banks, treasury officers nor fund managers.

The inflationary process occurs when the economy grows as spending increases without accompanying increases in production.

It’s so disturbing to see the world’s population not only battling the monster but increasing to an average of almost 8% in the United States, the highest rate since almost four decades ago.

A slight sigh of relief came from Africa’s largest economy as its headline inflation rate dipped to 15.60% from 15.63% in December 2021, although food prices continued to rise relatively.

With the rising cost of everything from food to transport fares, your cash in your savings account is losing its purchasing power. Be calm, though.

Therefore, it is possible to combat inflation without increasing wages. Start by following these rules:

Buy food in bulk and eat less outside

Nigerians typically spend more than half of their incomes on food, so cutting expenses in this area would save a lot of money

The cost of eating out is high. For a fraction of the cost of eating in a formal restaurant, you can prepare many of the meals at home. It is even cheaper to prepare breakfast at home.

Locally grown or produced foods are usually more affordable since long-distance transportation fees are not incurred.

You can also save a lot of money by buying in bulk. Make sure you pay attention to the prices and choose the family-size package if it is cheaper per unit and you have space for it.

Reduce everyday expenses by negotiating lower prices

Almost anything can be negotiated in order to deal with higher prices.

Build a relationship first, then ask if there are any programs or discounts you qualify for. It does no harm to ask.

Studies show that consumers who call and ask for a lower rate are usually successful, and this can help consumers lower their monthly expenses.

Consider postponing big purchases

The cost of everything won’t always be higher. Occasionally, price increases are temporary, in which case it may make sense to hold out. If you don’t need to purchase something right away, you can defer the purchase.

You might be able to get a better deal if you wait it out

If you suddenly have to buy something more expensive, then you have a more difficult situation. An emergency fund can help you in this situation. If you are able to save more, you will be less likely to be dependent on credit cards or other forms of high-interest debt.

Keep some of your savings in an alternative currency

The easiest and, perhaps, safest way to avoid inflation is to invest your savings in a currency that is less prone to inflation than the Naira.

Holding and investing cash in a currency that does not depreciate faster than the return earned in Naira is the key.

You can hold your cash in funds that do not pay terrific returns but still hold value.

As the investment’s duration grows, it is recommended that you seek not just current income, but also some yield to offset inflation even if the investment is in dollar terms.

Some recommendations are dollar-denominated debts and dividend ETFs to consider when holding surplus naira cash to hedge and earn against inflation in the greenback

Diversify your investment portfolio

Consider your income, expenses, risk tolerance, and time horizon when choosing investments to maintain your purchasing power.

The buying power of that part of your portfolio decreases when inflation is higher than what you are earning from your investments. Nevertheless, you have other options that compensate for it.

For those looking to escape the inflationary scourge, equity and security investments can be a safe haven.

Nevertheless, the risks must be taken into account. For unskilled investors, stocks, mutual funds, and ETFs carry a high level of risk.

Focus on diversification and rebalancing at least once a year to ensure you are not trying to time short-term market movements.