Inflation is often seen as a societal burden, making life more expensive as our purchasing power dwindles. But when I look at the historical price changes of key consumer goods and services, I can’t help but think that dealing with inflation might not be as complicated as it seems.
Sure, we’re all aware that the prices of food, gas, and utilities have gone up. But these increases are often offset by higher wages. And apart from these three recurring expenses, inflation doesn’t seem all that bad. In fact, I’m not convinced that these three items make up a significant portion of the average American’s budget.
Let’s take a look at an inflation chart of various goods and services to understand how prices have changed. Since 2000, the prices of hospital services, college tuition and fees, textbooks, medical care services, childcare, food and beverages, housing, new cars, and household furnishings have risen the most. On the other hand, the prices of televisions, toys, software, cellphone services, and clothing have declined the most.
Families are often hit hardest by inflation, but there’s hope that relief is on the way with inflation expected to decrease in 2024 and beyond.
So, how can we combat inflation? Here are some straightforward solutions:
- Consider not going to college or attending a community college or state college instead.
- Stay in great physical and mental shape to reduce your need for medical services.
- Eat less or substitute cheaper foods.
- Avoid buying a new car.
- Drive your existing car for as long as possible.
- Consider not having kids or having fewer kids.
- Buy a house with a fixed-rate mortgage.
- Invest in stocks, real estate, and other risk assets that tend to increase in price faster than inflation.
- Consider relocating to a lower-cost city or country to save on healthcare and college tuition expenses.
While these solutions may seem simple, they’re not always easy to implement, and many people are experiencing a silent recession as a result.
However, if you follow these suggestions, you might not feel the negative effects of inflation as much. In fact, you might even benefit from inflation if your income is increasing at a similar or faster rate.
Inflation can be a boon for real estate owners as it tends to push rents and property prices higher, while mortgage rates stay fixed. It can also boost corporate profits as companies can often charge more for goods and services faster than their increase in expenses.
As long as you’re working in a competitive industry and investing most of your cash in risk assets that have historically beaten inflation, you’ll likely end up wealthier with the help of inflation.
Of course, not everyone will agree with all the above-listed items to combat inflation. Some might balk at the idea of not going to college, eating less, or not having kids. But we must weigh the costs and benefits of each compared to the clear benefits of saving money.
In conclusion, while combating inflation might seem straightforward, it’s not always easy due to human nature. But as long as we’re regularly investing our cash flow, fixing our largest expenses, and living within our means, we should be net beneficiaries of inflation.
Investing in real estate is my favorite way to beat inflation long term. Real estate rides the inflation wave through capital appreciation and rent growth. I also recommend checking out Fundrise, a private real estate platform that allows you to invest in residential and industrial properties mainly in the Sunbelt.
In addition, one of the most interesting funds I’m allocating new capital toward is the Innovation Fund, which invests in artificial intelligence, modern data infrastructure, development operations, financial technology, and real estate and property technology.
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