Inflation is a measure of an increase in the rates of a set of goods and services over a specific period. Inflation has been increasing since last year. In the previous 30 years, the increase in inflation was recorded to be less than 3%. But inflation is back now, and it is expected to increase more in the coming months with a new baseline of 4% or 5%. Long-term high inflation affects the country’s economy in many ways. For example, it negatively affects export income and enhances inequality in income distribution. The main victims of long-term high inflation are job holders because their pay raise is not directly proportional to this rapidly increasing inflation. Small scale businesses face a major setback due to long-term high inflation because their profit margin is less than larger companies. Moreover, Interest rates of banks have also increased on loans.
Strategies to Overcome Long-Term High Inflation
There are many ways to overcome long-term high inflation. Some of them are mentioned below:-
Saving and Investment Strategies
Saving and investing strategies are also being modified with this economic change. You must invest in risky assets such as real estate to achieve long-term gain because nowadays, banks pay zero interest on your savings. Other ways to invest with low risk are investing in government bonds and buying stocks of big companies.
Mortgaging
Due to the recent increase in inflation, mortgaging is also becoming difficult because interest rates are increasing with increasing inflation. Therefore, the best way to buy a house is under a fixed mortgage. If you have purchased a home on a fixed mortgage, inflation will not affect your mortgage plan because your salary increases, but the mortgage is fixed.
Retirement Planning
Retired citizens suffer a significant loss due to long-term high inflation since they don’t have an active source of income after retirement. Therefore, the best way to face long-term inflation is by investing in commodities by buying physical goods such as gold or stocks of commodity-related businesses such as oil and gas. Also, you should invest in healthcare and long-term care insurance earlier in your life to enjoy a good life after retirement.
Conclusion
Long-term high inflation is a haunting truth to face in the coming years, but if you strategize correctly, you can solve this problem. Some solutions are investing in diversified assets, buying a retirement insurance plan, buying government bonds, and investing in real estate. You should consider investing in your future because inflation is not going anywhere, and keep in mind that it will get worse before getting better.
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