Updated: June 22, 2022
The rising costs of fuel and commodities are hitting everyone’s budget.
A week’s worth of groceries for our household was just P1,200 at the beginning of the year, but it’s now P1,800. That’s more than a 30% increase in food and essential supplies.
Unfortunately, the reasons for the surge in prices are both global and local, and worse – beyond our control.
Technically, we’ve already used much of our power to influence the national economy during the last election. And today, the most we can do is to manage our personal economy if we hope to survive these financially-challenging times.
But what exactly can we do other than reduce our expenses? Here are some other things you can do to be proactive with your finances.
1. Invest in knowledge.
It has to be said… an investment in knowledge pays the best interest.
The news will be full of discussions about the economy and interviews with financial experts. Take advantage of the free learning because it can benefit your investment decisions along the way.
Economics might not be your favorite subject in school (it was not for me), but the insights you’ll hear will hit different because you’re in the middle of the proverbial storm.
2. Invest in a side hustle.
The default response to rising inflation is to manage and minimize expenses. This is common sense and absolutely necessary. But don’t forget the other side of the cash flow equation: your income.
Take stock of your free time, your skills, your network, and available resources. These four factors will point you to the best side hustle you can do to earn extra money.
If you’re lost for an idea, then just try to sell something online.
A friend has been reselling perfume on Twitter. He’s a perfume enthusiast himself so he knows cheap suppliers. He’s very active on Twitter where he’s connected to a lot of professionals, which are his target market.
3. Invest in assets with high-yield interest rates.
At present, the best place to earn high-interest rates is digital banks, with as much as 6% per annum for a time deposit and around 2.5% per annum for a savings account.
If you have cash that you’re not planning to use for the next 12 months, then the time deposit is a good option. Then as much as half of your emergency fund can be parked in the digital bank high-interest savings account.
Search for ongoing promos, especially for new accounts, because some can give you as much as 4% per annum for a savings account.
Not familiar with digital banks? You can read about it here: Digital Banking in the Philippines
4. Invest in money market funds.
For your short-term and medium-term goals, or for money that you’re planning to use within the next 5 years, a tactical investing strategy right now is to put them in a money market fund.
Truth be told, it’s the only type of fund that’s making money right now. The returns are not attractive, but at least it’s positive and low-risk.
When things become less volatile and there’s more certainty in the market, you can always reallocate your assets to better-yielding investment funds.
5. Invest in companies that profit with inflation.
For your future goals, the equity market remains as a good investment option.
You can continue with your long-term investing strategy as is, but if you want to be a little tactical, you can buy shares of companies that belong to profitable sectors during high inflation.
Particularly, energy and utility companies, banking and financials, consumer staples, industrial, and healthcare. REITs with high-occupancy rates in their property portfolio are good options as well.
On the other hand, stay away from technology and consumer discretionary (entertainment) sectors for now.
You don’t have to stop investing when inflation is high.
Use this time to learn more about economics, be more meticulous with your budgeting and spending, and review your investment portfolio.
Be tactical with your asset allocation if you can afford it, but don’t make dramatic changes in your investment strategies because as with most things in life, nothing really ever stays the same forever.
Sooner or later, prices will stabilize, the recession will end, and it will be a bull market once again.
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