All economies worldwide, including the wealthiest ones like the U.K., US, Germany, Australia, and Spain, are being afflicted by a spiking level of inflation. For instance, the US suffered the highest increase of 9.1 percent in consumer prices in 2022. Germany suffered an annual inflation increase of 7.5 percent, while the U.K. suffered an increase of 8.2 percent in the same year.
Why is inflation spiking?
Covid-19 is among the global issues tied to the surge in inflation. Since 2020, the supply chain systems have experienced disruptions across transportation by ships, flights, trains, and trucks, resulting in a strain on the supply chain. Consequently, the cost of shipping goods has risen sharply. Since many manufacturers rely on a just-in-time mode of production, they have not been able to overcome the shortcomings of the transportation snafus. Thus, shortages occur, and consequential surge in prices.
The pandemic also left lasting effects on the labour markets when many businesses had to close or fire many employees. Even after the restrictions were relaxed, these businesses could not hire their employees back. This led to labour shortages that needed higher capital to acquire and maintain.
As though the pandemic was not enough, the issue of inflation was compounded by Russia’s war on Ukraine. The war began in February 24 and interfered with the supply of grains and fuel globally. Some countries fought against Russian imports because of their involvement in the war, and in retaliation, Russia decided to halt its oil shipment.
This has resulted in the disruption of the market globally. The conflict between the two countries has increased uin food prices. Ukraine is among the largest food exporters due to its possession of fertile soils. However, Russia destroyed Ukrainian crops and undermined the country’s ability to export foodstuffs. This has led to a worldwide increase of agricultural commodities prices.
Top tips for surviving when inflation spikes
The spiking of inflation can cause strains on finances among many people, and there is a need to adopt strategies that will help to align with the prices. Here are some of the strategies to adopt:
1. Avoid taking debts
Although banks decided to maintain low-interest rates during the pandemic, new debts became a liability that needed to be serviced monthly. It reduces people’s financial flexibility because it adds extra to the budget. If taking loans is investable, at least consider shopping around for low-rate or zero percent balance-transfer cards. This will reduce the burden of the repayment and the extra interest rate.
2. Start paying more attention to sales
Inflation time is the time to become a bargain hunter. Paying more attention to sales will guide you where to whop what and when. Some people have resorted in taking advantage of price-matching policies by shopping essentials in bulk and enjoying the discounts that come with it. Others have switched to cheaper brands, which has helped them save a few coins that help them hedge against inflation.
3. Stay within a budget
Inflation makes it difficult for people to stay within a budget because the prices of commodities have gone high and the income is not increasing. It is important to reassess your spending habits and adopt more conservative ones.
This is the time to forego family vacations, changing the car out of luxury, gym subscription, dining out, and other things that can be put on hold. It is the time to check the things that you can temporarily do without to ensure that essentials such as housing, food, transportation and utilities are covered.
4. Save strategically
Some saving strategies such as high-interest savings account (HISA) are subject to earning less interest during inflation because of their variable rates. A smart way of saving during such a time is using methods with a constant rate of earned interests such as the Guaranteed Investment Certificate to ensure that even when the inflation is high, your savings are accruing interest at a constant rate.
5. Hunt for remote part-time positions
During inflation, as many companies are firing their employees, remote positions are their alternative labour markets as they are devoid of the costs that come with running a typical office.
A remote position will also be a smart way to reduce transport costs as one will work from home. It is also a way of earning extra income while still formerly employed to help curb the margin created by the hiked prices of commodities.