There are enough clouds on the horizon to anticipate a potential economic downturn. Certainly, the stock market seems to be saying this. This last week there was further evidence that inflation is gaining a strong root.
On Feb. 15, the Bureau of Labor Statistics (BLS) reported that producer prices rose 9.7% over the last year. Moreover, the monthly rate in January was 0.9%, which works out to an annualized compounded inflation rate of 11.35%. Even without compounding, it adds up to 10.8% over the next 12 months.
This is after the BLS said consumer prices are up 7.5% in the last year. I wrote about this last week in my article, "Inflation is Spiraling Out of Control - Now at 7.5% and Climbing."
Smart investors and consumers are starting to plan now. Here are some actions that Investors and consumers can take to start protecting against higher inflation.
Actions To Take To Protect Against Inflation
Here are 10 things you can do now to help protect against spiraling inflation.
1. Start buying in bulk - Prices are rising now, so it's better to buy in bulk before they rise.
2. Buy your house now - don't wait too much longer. - Prices are skyrocketing everywhere.
3. Rent for longer - Sign a minimum year-long lease or longer if you can.
4. Sell unused assets - any asset, including cars, clothes, electronics, etc. should be sold for cash
5. Find extra income - side hustles, even if is it just transcribing online, adds to extra income
6. Ask for a pay raise - to match your income with expenses. If you don't get it, switch jobs.
7. Reduce expenses - cut the extra vacation, extra channels, recurring expenses on your card
8. Get on a budget - Zero-based budgeting, as Dave Ramsey teaches, helps you plan everything
9. Develop passive income - research ways to develop passive income, including from investments
10. Invest in stocks, not bonds - stay away from fixed-income investments, even if their rates rise
What If Inflation Starts to Spiral?
The first thing you will naturally do is start to hoard physical items, including medicine, essentials, and develop ways to produce extra income.
Second, if things start to get out of control, it's important to start to think about essentials like food, water, and energy. Food can be hoarded, and things like water can also be stored, but energy is more difficult.
Consider buying two things for energy storage: a generator and several 200 to 300-watt solar panels and related items like batteries, inverters, and battery management control systems (necessary for solar panels).
Lastly, start thinking about security. What measures are you willing to take to protect your assets and your home?
What About Money?
When inflation starts to spiral, paper assets become less valuable. This means physical assets are more valuable.
Everyone should consider purchasing some hard asset items like gold, silver, and even store cash. If there is a run on a bank you will need to have certain amounts of cash in your home.
I also recommend buying stocks that pay dividends and have the ability to raise their dividend rates. This includes some of the major tech stocks and some of the utilities.
Keep in mind, however, that inflation destroys financial assets, and the market will crash at some point.
Moreover, I also think some cryptocurrencies, especially Bitcoin and Ethereum will likely be able to overcome any major crash.
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This is not financial advice and you should not rely on my analysis to buy or sell any stock, bond, REIT, crypto, home, or insurance product as I am not undertaking to induce you to buy or sell any securities or financial assets or home products. Additional information on Mark Hake's stock coverage can be found at TipRanks.com.
I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.
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