How to beat inflation

Are you feeling the impact of higher prices in the supermarket and restaurants and higher prices at the gas pump?

It seems everywhere you go these days, you are paying more money out of pocket to have a simple meal or to purchase necessities.

Inflation is the reason behind this.

Inflation is the general increase in the price of consumer goods and services. Inflation, however, eats away your cash, as when prices go up, the value of money erodes over time … sometimes quite quickly.

In Jamaica, the Bank of Jamaica has the mandate to ensure that the annual increase in the prices of consumer goods and services (that is inflation) remains within its inflation target of four to six per cent.

Recently, point-to-point inflation up to August 2021 reached 6.1 per cent, which is above the BOJ’s target.

to this end, the BOJ raised its benchmark interest rate by 100 basis points to 1.5 per cent (effective Oct 1 2021), to combat the impact of rising inflation on the Jamaican economy.

In the United States, the Federal Reserve recently raised its inflation forecasts for 2021, 2022 and 2023. It now expects the core personal consumption expenditure index, the central bank’s preferred measure of tracking prices, to rise by 3.7 per cent this year, compared to the three per cent it predicted earlier in June 2021, as well as 2.3 per cent next year, up from 2.1 per cent.

So how exactly do you stretch your money further when there are higher prices everywhere

Let me share what will not work in a high inflation environment.

Tucking your money away in a savings account right now and hoping to create wealth would not be ideal. The return you are making on your savings account will never account for the impact of inflation. You are not growing your money, but you are becoming poorer in real terms.

So what should you do in a high inflation environment? The simple answer is investing.

By investing in stocks, you are becoming a shareholder in companies that can pivot their business to account for the impact of inflation. This will allow for resilience in the company’s earnings, and in turn, benefit the investor. Investing in other asset classes such as unit trusts, cryptocurrency, real estate, precious metals and commodities may also enable you to beat inflation.

Now more than ever, it is critical to get started with investing if you have any plans of creating generational wealth for you and your family.

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