INFLATION is an increase in the price of commonly used goods and services in an economy making our buying power lower for a particular amount of peso. This is the reason why we can hear our grandparents sharing that they can buy a lot with P100 during 1970s.
As we return back to mostly face-to-face meetings, may it be in school or at work, our expenses also changed because of transportation-related and food-related needs outside our home. Based on government statistics, inflation for the first quarter of 2023 can reach to 8 percent. With this happening, how can we maximize investing to fight inflation with the right precautions?
I would like to quote what the legendary investor said: “Be fearful when others are greedy and greedy when others are fearful.”
If we will look at this message in the right context, we will see that there’s always an opportunity in the midst of every difficulty.
Here are some tips on what we can do during high inflation.
1. Focus on companies that generate income rather than consume cash. As inflation intensifies, more companies have this strategy of spending their funds to maintain physical volume of business.
However, there are companies that focus on generating profit with minimal expenses. This can be an advantage for a steady growth in their stock because they are providing innovative ideas and move.
Such businesses must have these characteristics: the ability to increase price and the ability to accommodate large volume increases in business transactions.
2. Consider investing in real estate. Historically, real estate has been an effective hedge against inflation. The rise in property values enable owners to maintain a good profit by having their properties rented out or by selling a particular house on a higher price.
This is the reason why a lot of people buy condominium units in the metropolis, which they sell when price increases after two years to three years.
3. Maintain a flexible budget. Consider lowering your lifestyle expenses on the side of wants. We definitely can’t cut down our budget on basic needs. But for some extra cash that we have, like spending on travel or leisure, we may allocate 20 percent to investing. This way we can earn passively rather than being affected by the high cost of living and being unaware of it.
4. Take care of your health and well-being. Since money is the usual topic in investing, let us talk about our health and wellness. Do you agree with me when I say that health is really wealth?
Just imagine if someone in the family is hospitalized. It will take a big chunk in our savings, which can disrupt our financial goals. Eating healthy food, getting adequate sleep and exercise will strengthen our immunity.
5. Invest in yourself. Investing in ourselves means that we continuously upgrade our skills and knowledge. May it be attending a seminar, certification course or taking up a master’s degree, these will allow us to earn more. Investing in education can be an advantage in the long run as it will allow us to make better decisions in business resulting to profit, high salary if you are employed and with this you can add more value to the community, which will give you an edge in your industry.
6. Don’t lose hope. Most of the time, we can be consumed by news that affect our demeanor. Remember that everything is temporary and things may get better. Keep on moving forward, enjoy your time with your family and expect that the light at the end of the tunnel is coming your way.
A person without money but with high hopes can see the opportunities in the midst of a difficult situation but a person with a lot of money but without hope can be miserable.
Let us all be grateful with what we have and count all the blessings albeit we are experiencing different challenges in the economy. We can also help one another thrive and succeed. With this, our nation will progress and make a different in the rest of the world.
The good thing is we are in a demographic sweet spot: our population are mostly young and in the working age.
Karlo Biglang-awa is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 100th RFP program this March. To inquire, e-mail firstname.lastname@example.org or text at 0917-6248110.
Image credits: Svershinsky | Dreamstime.com