Been to the grocery store lately? Prices are going up. Inflation is slowly creeping in, and prices could continue rising for the foreseeable future. So the most obvious way is to make more money, but getting a raise isn’t always possible. A stimulus check may help, but that’s just a temporary fix.
Inflation can be defined as the decline of purchasing power of a given currency over time.
Inflation can affect the economy in several ways:
- More difficult to save money. As more money is needed to buy goods and services, less money can be saved.
- Standard of living decreases. If wages and salaries remain the same while purchasing power decreases, people can buy less, which decreases their standard of living.
- Governments may get more in tax revenues. Inflation means higher prices, which translates into more tax monies received. It is believed these tax revenues help jurisdictions fund various projects.
- Big impact on imports and exports. If a country experiences inflation, their goods and services are more expensive compared to goods and services from other countries. As a result, sales of goods sent to other countries will decrease while the import of goods from other countries will increase.
The opposite of inflation is deflation. Deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This has been a hot topic in the news lately. Click here for an article on China and deflation fears.
For the average person, inflation isn’t considered a good thing because their money can buy less and less over time. During these challenging times, one of the best things they can do is become a producer:
By selling goods or providing a service, you can keep up by raising the prices of your items as well. In other words, don’t just consume goods and services, find ways to produce a good or service as well.
The Power of Gold and Silver
During periods of inflation, many people buy gold and silver. Both precious metals have been used as money for over 5000 years and retain their value. An increase in the price of gold is often used as a gauge to determine the dollar’s purchasing power: the more expensive gold is, the less purchasing power it has.
In addition, gold and silver can be exchanged for any currency in the world, such as the U.S. dollar, the euro, Chinese yuan, or even the Venezuelan bolivar. Some people will slowly accumulate the metals over time, and sell a portion when it nears its high. But instead of purchasing items that lose value such as clothes, shoes, video games or electronics, they use those the funds to purchase another asset that can generate revenue for them, such as rental property or a business.
Another benefit of gold and silver is they are “outside” of the current monetary system. That means if the stock market drops or something happens to the dollar, their value won’t be affected.
Here are a few reasons why I like gold and silver.
Gold isn’t discussed in mainstream media much, but it’s still important for preserving wealth. For example, the following countries bought gold in the 2nd quarter of 2021:
- Thailand: 90.20 Tonnes
- Brazil: 53.75 Tonnes
- Turkey: 8.67 Tonnes
- India: 8.40 Tonnes
- Qatar: 3.12 Tonnes
Read more about gold purchases HERE.
Inflation is a natural occurrence in the economy. It’s important to understand when it occurs and things a person can do to minimize its effects. Unfortunately, this information isn’t discussed in school as much as it should be.
Call To Action
Generating your own revenue is one of the best ways to overcome the effects of inflation. In addition, simply having multiple streams of income is key. Most people rely on one check (aka their job) to pay all their bills, but this is a mistake. The more revenue streams a person has, the better off they will be.
There are many products and services a person can sell that help them deal with inflation. The key is to know what they are and how they can be utilized. Get more great tips in my book Invest For Success: Millionaire Wealth Strategies Not Taught in School. Now available on Amazon. Also, sign up for the corresponding course Invest For Success: Winning Wealth Strategies Not Taught in School.
Get more tips in our online course: Tired of the 9-5? How To Retire Early With Passive Income. Available on Udemy.