It’s one thing to buy gold and invest in BRIC ETFs to help protect your assets from double-digit inflation or hyperinflation expectations, but what if you don’t have that many assets to invest? What if you don’t really have any extra money at all? What should you do to prepare for high inflation? Does it even matter?
5 Ways You Can Prepare For Inflation If You Have No Money
1. Save pennies and coins for their actual metal value. For example, the US penny is worth more for its copper than money value. Although many coins are now diluted and do not represent 100% nickel or copper, they may still be worth more than their “face” or “nominal” monetary value.
2. Similarly, save bullets and other real assets for their innate value. Bullets themselves don’t trade on stock exchanges, but the shares of companies who produce them do. While I don’t personally advocate the monetary support of this industry, it is just one example and others could fit the bill here, too. You may not be able to afford the shares, but perhaps you already have the actual goods that those shares represent anyway.
3. Improve your career prospects. You might be able to get a raise, take a new certification, work on a new project, or something else which can boost your resume’s bottom line and your own future income-earning prospects.
4. Get rid of debt. In theory, inflation makes it easier to pay off debt with “cheaper” money. But this applies more at the macroeconomic level, based on my own understanding. If we see stagflation and you stop getting raises, your own personal debts might become more unbearable. Simply put, there is never a good time to carry high-cost consumer debt. If you have no credit card or loan debt – congratulations. Work on the mortgage instead.
5. Start a DRIP in some company poised to benefit from inflation. In other words, start investing with no costs at all. The reason you don’t have any investments yet is because you didn’t have much to start with, or because you don’t know enough and it might seem complicated. But there are easy ways to get around both these obstacles. Investing with a company that pays rising dividends is a good way to diversify some of your income and help you “float with the rising inflation tide.” Companies like Proctor & Gamble (NYSE: PG) will be passing their higher costs onto consumers and it all comes back as profits, some of which get paid out as dividends. You can be a part of that stream for no more costs than the money you invest itself. All the usual disclaimers apply here, of course, but when you understand what you’re doing this is a great way to benefit from inflation. You don’t want to keep any money you can save in US dollars alone, because their purchasing power will fall once inflation kicks in.
Unlike your higher networth peers, who need to worry about protecting the wealth they’ve worked so hard to accumulate, you may not need to have complicated currency hedges and international diversification in place – since you may not be able to. Instead, focus on improving the economic situation you do have. The very fact that you don’t have many equities, bonds and other assets to protect could very well work in your favor at this time.
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Essentially, the best way to protect yourself against high inflation is to get a hold of as many cash flow producing and appreciating assets as possible. Even alternative asset classes like this blog that makes money from advertising could be considered a cash flow producing asset and a nice alternative to having cash on hand.