Inflation-proofing your Money

Inflation is a scary word for anyone and with news about an imminent recession, it’s all the more stressful. To put the latter into context, we are currently experiencing uncontrollably high levels of inflation and the anticipated downturn is a measure the Reserve Bank will be using to bring it down to a normal range.

As simple as it sounds, it will still cause a degree of pain to the pockets of everyday Kiwis. We understand how depressing it can be to work 40 hours a week only for your hard earned money to disappear after a few trips to the grocery and petrol pump and after paying your bills.  This is what inflation does and in the long-term, this can erode the purchasing power of your salary and your savings.

Fortunately, there are things you can do to protect your money during times of strong inflation.

NUMBER ONE: Find ways to Boost your Income

One way of protecting your purchasing power is to increase your salary at the same rate or higher than inflation. What’s great about this method is you can do this through several ways and our current labor environment provides opportunities for it.

If you’re discussing your salary with your boss…

Be prepared to do some research so you can provide a basis for your salary request. It never hurts to ask especially if you have been with your current employer for a while and if you are performing well. In case you can’t agree on a raise, you can also consider negotiating benefits. You can open up about having more supportive benefits like extra leave credits, retirement plans, employee discounts and perks. Anything you don’t have to pay for is a win.

If you prefer to look for a new job…

Rather than tough it out at your current work, learn about industries in light of inflation. This means looking at companies that are growing and offer higher wages or positions. There are many job hiring portals you can count on, just be sure to find work that matches your skillset.

If you’re onto the path of side hustles…

Make sure to do your research on a new income stream that you are interested in and factor in how much you can realistically earn. Having a small business also serves as a creative outlet and helps you grow your network. It may be challenging to start in the beginning, but the potential of earning more to take control of your finances is worth it.

Don’t skip investing in yourself…

Because the quickest and most effective way to boost your salary and career prospects is to put money, energy and time into yourself. Studies show that those who constantly work on themselves are more confident, knowledgeable and more resilient against mental stress. In turn, those who have these qualities are more adaptable to change and attract more business connections and financial opportunities. 

Consider investing your money…

As a way to grow what you currently have. There are different ways to invest your money, including bonds, stocks and managed funds however it is important to keep in mind that each investment comes with risk. Time and again, we have found that property is one of the most stable forms of assets you can own. It also dramatically improves your financial position in times of high inflation. 

If you are unsure of what options to take, get your hands on resources that teach about how to invest your money in the correct way. If you don’t know where to start, talk to a financial adviser so you can create a plan that works for you.

NUMBER THREE: Rethink Your Household Expenses
So this is the time to cut back…

We don’t want to be a party pooper this holiday season but in order to support your efforts to grow your money, you also have to look into how you spend it. You may need to cut back on non-essentials, make meal plans and take advantage of sales. What we want you to do is make small changes so you can free up a significant amount of money each month. Anything you save can go towards paying down debt, building your savings or investing in inflation-proof assets like real estate. has a great budgeting tool, and many other helpful resources that are all free of charge, so make sure you check that out. We recommend that to be as accurate as possible with your budget, you should look at your last three months worth of bank statements. You might be surprised to discover that there could easily be areas where you can trim your spending without having a major impact on your lifestyle.

With mortgage interest rates on the rise, you might find it harder to keep up with the increased cost of your mortgage payments. We recommend that you get in touch with your mortgage adviser sooner rather than later, as there might be something they can do to help relieve the financial pressure. For example, extending the term of your mortgage to reduce your payments, or putting your mortgage on to interest only terms until interest rates start to reduce again.

If you are hosting Christmas, consider asking everyone to bring part of the dinner menu with them, or have just one component of your Christmas spread to be the wow factor that will make the meal really memorable. Don’t put yourself into financial stress to impress anyone (same goes for gifts). There is a well known saying that is “Those that matter don’t mind, and those that mind don’t matter”.

Should you keep track of inflation numbers?

You can keep tabs on the inflation rate through the Consumer Price Index (CPI) as it tracks the prices of goods and services. However, it may not accurately account for patterns of regional prices, and it also does not take into account your personal spending habits. For example, you might spend more on certain items compared to other people.

Inflation is often thought of as something that happens gradually over time, but unexpected factors like the pandemic have proven that it can rise rapidly, which is why it is important to be prepared. By following our suggestions, you can adapt and thrive financially even in hard times.