How Do You Protect Your Income Against Inflation?

Inflation is an ever-present threat to our income and savings. According to the latest data, the $100 bill you have in your pocket today will be worth $96.90 next year.

As prices go up, your purchasing power heads the opposite way. Your favorite movie ticket or coffee could cost more next month, even if you don’t go more often.

So, how do you protect your income against inflation and sustain your lifestyle?

At Brogan Financial, we are committed to finding the most effective solutions to protect you from inflationary pressures. 

So, let us offer some tips and insights to alleviate some of the financial strain caused by inflation and help safeguard your income.

How to Protect Income Against Inflation 

It’s natural to worry about inflation jeopardizing your income and financial goals. While it’s nearly impossible to dodge the inflation-shaped bullet entirely, there are steps you can take to ease its bite without shaking up your investments too much. Here are some strategies you can consider: 

1. Be Smart with Your Spending 

An average American spends more than $3000 on the internet, streaming services, and mobile and spends more than $2500 on average per vacation. Cut back on optional expenses, like entertainment or travel, by a mere 5%. It’s a small adjustment that’s easy to make and directly impacts your wallet. 

Go for generic products and medications to save money. Reduce necessary expenses using coupons and loyalty programs. Take advantage of membership cards such as Walmart+ to receive a 5-cent per gallon discount on gas, or choose the most beneficial rewards credit card for fuel purchases.

Keep tabs on your spending to identify areas where you can make cutbacks. Utilize apps, spreadsheets, or a basic notebook to track your expenditures. Consider cooking more meals at home and exploring more affordable entertainment options. Once you analyze your spending habits, you’ll uncover opportunities to save money.

2. Switch to High-Yield Accounts to Maximize Your Savings 

Keeping your funds in a regular checking or savings account—or even worse, at home—means inflation slowly diminishes its value. To mitigate losses, consider transferring money you can’t afford to invest, such as your emergency fund or savings for a house down payment, to a high-yield savings account.

• How significant is the difference? 

While the average savings account return is a meager 0.47%, high-yield accounts typically yield between 4% and 5%, substantially surpassing the current inflation rate. An experienced wealth manager can help you find the best high-yield saving options. 

3. Diversify Your Portfolio 

Investing exclusively in a small number of stocks in the stock market can be risky. If one of those companies fails or experiences a decline in stock price, you could suffer substantial losses. Portfolio diversification is essential for mitigating this risk by spreading your investments across a range of companies. 

In this way, if one company underperforms, gains from others can help offset its losses, protecting your investment. A diverse portfolio can also help you fight inflation effectively. 

4. Invest in Alternative Assets

For those who have already allocated savings to a high-yield savings account, ventured into the stock market, and diversified their portfolio, exploring alternative investments can offer protection against inflation. 

Real estate, commodities, and natural resources are popular alternate investment picks. Home prices rose over 3% in 2023 compared to 2022. While natural resources have been down recently, commodities have also approached new highs.  This type of diversification may provide you with more stability, as you’ll hopefully have more investments that “zig” and “zag” at different times.

Work with Us

Is inflation squeezing your income? You’re not alone. But it doesn’t have to control your future. At Brogan Financial, we help you build a personalized inflation-busting strategy.

Schedule a free consultation with us to discuss your unique situation and explore how we can help you achieve your financial goals, even in challenging times.

Remember to catch ‘More Living with Jim Brogan’ on 98.7 FM WOKI every Saturday morning at 9 a.m. for additional financial insights and engaging conversations!