Personal Finance Strategies to Cope With the Rising Inflation

Updated: May 22, 2023

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Inflation is a normal part of our economic life. Prices of stuff will always go up. And its effect is minimal as long as our income can catch up.

From 1992 until 2017, the annual inflation rates in the Philippines were between 1.4% to 9.8% for any given year. If you received a salary increase of at least 10% every year, then your finances are probably okay.

Unfortunately, the inflation rates that you see on the news is never the same as your personal inflation rate. This actually tends to be higher.

Inflation numbers are based on the price increase of basic commodities. But of course, you don’t just spend on basic goods and services — you travel for vacation, you dine in restaurants often, and/or you own a car, etc.

Parking fees at the mall in my area used to be P30 per entry last year. Today, it’s P40 per entry; and that’s a whopping 34% annual increase!

Inflation is caused by many factors and is not always bad. In fact, the opposite of it, called deflation, where prices of basic commodities go down, can also be taken as a bad sign for the economy.

However, if inflation rates are going up above what our income can handle, then that should serve as a reminder for us to take a closer look at how we spend.

So what you can do to cope with rising inflation? Here are some personal finance strategies you can apply.

Study and minimize your spending.

It’s a good time to analyze where you often spend your money. And eliminate some of your non-essential expenses, or replace some of your costs with more affordable alternatives.

For example, instead of dining out every weekend, maybe you can just do it once a month because it’s really much cheaper to cook your own food and eat at home.

Barter services with family and friends.

I like washing my car every weekend. It’s one of the chores I actually enjoy. However, I hate doing laundry, so I always take my clothes to the laundromat instead.

The laundry fees in my area have increased lately. So sometimes, I’d just bring my soiled shirts to my parents’ house and ask my mother to wash them for me. In exchange, I clean my father’s car, which he normally takes to the car wash.

I and my parents just saved some money by simply doing for each other what we’d normally pay someone to do for us. It’s a good money-saving strategy, especially when inflation is rising.

Increase your income.

After you’ve done your best to lower your expenses, it’s now time to increase your cash flow.

The easiest thing you can do, particularly if you’re employed, is to talk to your boss and ask for a raise. If you’re a freelancer or an entrepreneur, then check if it’s possible to increase your rates and prices.

Of course, you can also create additional sources of income. Try doing some freelance work, or check if there’s a home-based business you can start.

When inflation is rising, the effect is most felt by those who are earning a fixed salary. So creating a variable and scalable income source is a good strategy.

Diversify your portfolio.

Regardless of the state of the economy. You must invest regularly. This is one of the best ways to actually beat inflation, especially in the long-term.

However, when the inflation rate is going up, real assets become more attractive as an investment as their prices are poised to go up in the next several months because of the rising inflation. One example of this is gold.

Alternatively, you can also choose to diversify your portfolio and put money in foreign stocks or investment funds with global exposure.

Invest in yourself.

Finally, you can also choose to invest in your financial education. Particularly, it’s a good time to learn the relationship between stocks and bonds, and how inflation and interest rates affect them.

In short, it’s a great opportunity to study how a country’s economy works. During this period, there will be more news features and articles about what’s happening in the economy. Take advantage and increase your financial quotient.

Initiate discussions with your friends in real life and participate in the conversations on social media. By doing so, you’ll definitely become a better investor because you’ll have an improved understanding of how things work in the financial world.

What about you? Do you have more tips on how to cope with rising inflation, which you’d like to share? Then leave it as a comment below. Thanks!

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