IN the 1970s, Australia experienced a period of high inflation that had a significant impact on the economy and the finances of individuals.
In fact, in March 1975 inflation peaked at an eye watering 17.7 per cent , more than double the current high inflation we have today.
During this early part of the 70s, the cost of goods and services rose rapidly, making it more difficult for people to make ends meet, sound familiar?.
Try these proven strategies from the 70s for protecting your finances from inflation.
KEEP CASH RESERVES.
During times of high inflation, it is important to have cash reserves to cover expenses. Keep these funds in a high-interest savings account.
INVEST IN REAL ESTATE.
With rising interest rates this is easier said than done. But investing in or perhaps holding onto real estate assets is one way to protect your finances from inflation.
Property values tend to increase as the cost of building materials and tradie labour is impacted by inflation.
DIVERSIFY YOUR PORTFOLIO.
Diversification is always an important strategy for protecting your finances, but it is especially important during periods of high inflation.
By diversifying your portfolio across different asset classes, such as shares, bonds, real estate, and even precious metals, you can minimise the impact of inflation on your overall portfolio.
INVEST FOR DIVIDENDS.
Company shares that pay a strong dividend (profit share) will also offer some inflation protection.
As the cost of goods and services rise, the value of a company’s revenue and profits may also increase, leading to increased dividend payments.
High inflation and rising interest rates make it more difficult to pay off our loans.
Attack high-interest debts like credit cards as quickly as possible.
This will limit the extra interest costs associated with carrying debt during periods of high inflation.
ADJUST YOUR SPENDING HABITS.
This might mean cutting back on discretionary spending and finding ways to save money on necessary expenses.
Try meal planning and shopping for lower-cost groceries, reduce your energy consumption by rugging up through winter rather than continually heating your home.
During times of rising interest rates and high inflation, it can feel like we’re in a small boat being thrown around on rough seas.
To regain a sense of control and hope, take consistent action to fight back against the impact of inflation.
Not only will this help you navigate these challenging times, but being the boss of your money is a skill that will benefit you for many years into the future.