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3 Things You Must Do To Counter Inflation

Retirees must keep a close watch on their retirement corpus because it can erode quickly if timely measures are not taken to mitigate the impact of inflation

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Amit Sethi
August 29, 2023
Counter Inflation

Counter Inflation

Inflation has been in the news in recent months. The prices of food and other commodities have gone up significantly, aggravated by Covid-19 and the Ukraine war. Inflation reduces the purchasing power of your money. Therefore, you must guard against it. So, let’s check out three important ways to counter the inflation.

Invest Wisely

The best way to counter inflation is to fetch a higher return on your investments than the prevailing inflation rate. In fact, it should beat inflation with a good margin because many expenses are not captured by the inflation data, which is often used as a benchmark for interest rates or returns.

While you may like to invest in assets that provide the maximum returns, you should also understand the risk-return matrix of the assets. Any investment potentially providing higher returns also exposes you to higher risk. For example, investments in equities have the potential to offer higher returns, and they have provided it in the past, but they also expose you to higher market volatility. Sometimes, it can even erode your entire invested capital, or sometimes, the money can double in a few months. So, uncertainty is what makes equity investment risky.

Mutual funds offer various investment options, but you must choose them wisely. Equity funds, as explained above, can be risky for the retirees. As a senior citizen, investing in debt or balanced funds can be wiser. They provide better safety to your investment. The returns also beat inflation, and they offer high liquidity.

Apart from mutual funds, you can invest in small savings schemes and bank fixed deposits (FDs) with high interest rates.

Stay Ready To Use Your Past Work Experience To Earn

Retirement should not be the end of work. You can use your rich experience to do a part-time assignment or offer to teach in local colleges or students, especially when you are falling short of achieving your retirement goals due to the impact of inflation. Skills and experience are always in demand. The payment after retirement may not be as high as in your working life, but this will provide much-needed financial help.

Control Your Expenses

A penny saved is a penny earned. Controlling your expenses will go a long way in making your life financially stress-free. There are many things we can do to maintain our expenses after retirement. Substitute your expensive gifts with creative gifts that more conspicuously show your love and appreciation. Reduce the frequency of movies, dining out, tourism, etc.

You must plan your taxes well, as it can save you lots of money, especially when trying to counter inflation. Review your budget from time to time and stay adequately insured against the health risk.

 

The author is an independent financial journalist

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