Changing Your Mindset Could Help You Deal With Inflation
Inflation has infested our food and energy supplies, so it's hard to avoid. And the usual Fed remedies – such as raising interest rates – may not help either, especially as interest rates are being lowered for other economic reasons.
The following ideas won't solve all of your financial woes, but they may help you to keep a few extra dollars in your pocket as prices continue to increase.
Take advantage of the Wal-Mart effect: Whatever you think of Wal-Mart, it has had a huge effect on the efficiency of the entire global supply chain. The insistence on cutting waste at every step in that chain is one big force combating inflation today. Bringing that philosophy to your household can save you some real money. Ways to do that include buying at warehouse clubs, and being careful not to waste water or electricity.
Learn to do with a little less: You've heard this before, but it doesn't hurt to hear it again. If the price of steak goes up 15 percent, switch to hamburger. Use frozen juice instead of store-bought bottles. Use generics instead of branded products. And keep your car for an extra year or two. Small adjustments can make a big difference.
Dip a toe into the real-estate pond: It's still early, and we may not have hit bottom yet, but in the long run, three things drive real-estate prices: supply/demand, interest rates and inflation. The supply/demand arrow may still point the wrong way, but there are signs of improvement in existing-home sales. Interest rates and inflation are also pointing the right way. Low interest rates and higher inflation make real estate a better investment. What's more, rarely do both rates and inflation point the right way at the same time. Interest rates usually rise when inflation rises due to Fed actions and investor expectations. So if the supply/demand balance improves, all three real-estate price drivers will align the right way. It could be a rare window of opportunity.
– By Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950. This report contains information previously published by Dow Jones Newswires.
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