A few years ago, it became very important to prepare for inflation by protecting your personal assets so that you wouldn’t lose everything. The economy took a turn for the worse and many people lost jobs or suffered pay cuts. At the time of this writing, the economy has not yet crashed in 2022. However, inflation has outpaced the increase in wages by a sizable amount. It is only a matter of time before we begin to see some set backs in our current economy. Are your personal assets protected?
When we talk about ‘personal assets’, we mean things like your time, money and energy—all of which are essential to your success in surviving inflation. Personal assets can be anything that’s valuable to you—from skills to experiences to time and money. You will probably want to protect your personal physical assets, such as your home, car, or any other possessions that you may need in an emergency.
Protecting Your Personal Assets by Understanding How Inflation Works
One of the more basic economics principles is inflation. Inflation simply means that prices keep rising. How can prices keep rising? Because people demand more goods and services than can be produced or delivered, which causes the Government to create more money.
One of the reasons inflation is so high today because during the covid pandemic the Biden Administration gave out stimulus checks twice. This made all of us have a few dollars we did not expect to have. And, unfortunately, when most of us get extra money we tend to spend it. This causes a supply and demand scenario and we cannot get enough goods. The price then goes up. This coupled with the high price of gas and diesel fuel and we have a 40 year inflationary high. Whose fault is it that we have such a high inflation in 2022? I won’t get into that, but I will say you better be protecting your personal assets.
Protecting Your Personal Assets by Creating a Financial Plan for the Future
The key to making good financial decisions is having a plan in place. The first thing you need to do is take stock of where you are and where you want to be. Do you know what your current income is? If not, you’ll need to track all of your sources of income and expenses, and calculate a net worth statement. You should also figure out what your goals are. This includes your current salary and any side hustles you’re working on.
Budget, Budget, Budget
In order to create a personal budget, it’s important to first understand the difference between needs and wants. Needs are necessary things that the family must have in order to survive. Wants are things you desire or enjoy that aren’t necessary for your survival. Some examples of needs include eating, clothing, shelter, transportation, and medical care. Wants include things like a weekend away, a new pair of shoes, or the best new phone when the old one works fine. A budget is simply a plan of action for how to spend your money. If you’re saving for a particular purpose, then you’ll have to create a specific amount of cash to be saved each month.
Create a Savings Strategy
We’re all for creating an effective savings strategy, but we’re equally big fans of doing it in the simplest way possible. This is because the more complex your savings plan gets, the more likely it is that you’ll never implement it. The reason? Complexity makes it difficult to execute. So make it simple. Save at least 10% of your take home pay, and if you can swing it, save 20%. That’s it. Once you have your budget worked out you should know where you can cut corners so you can begin saving more and more.
Create an Emergency Fund
An emergency fund is a savings account that’s specifically designed to pay for unexpected expenses such as car repairs, medical bills, and home improvements. It can also help cushion you from sudden unemployment or an unforeseen layoff or the high inflation rate we are currently experiencing. You should aim to save 10 percent of your monthly gross income for an emergency fund (this is also known as a rainy-day fund). Ideally, this fund should be separate from your regular checking and savings accounts. That way, you’ll have a source of money readily available for emergencies without having to dig through your regular accounts.
Prepare for Retirement
Retirement planning is an important part of preparing for any transition in life. No matter what stage of life you’re in, you should start preparing for retirement by creating a plan now, says Trish. This is especially true if you’re young. Start saving as much money as you can. Don’t wait until you’re 40 to put away money for your retirement. The most common mistake people make is not saving enough for retirement. While the government offers up to $19,000 per year in Social Security benefits, the average American only receives about $16,000 per year. Set aside a percentage of your monthly paycheck and keep the money separate from your regular spending money. Every month you put it away, you’re making a contribution to your retirement. The sooner you start saving, the more you’ll have to rely on during your retirement years. (More on Retirement)
Protecting Your Personal Assets by Paying Off Your Debt
Here’s a common problem for people trying to make significant changes in their lives: They have a lot of debt. Maybe it’s credit card debt. Maybe it’s student loan debt. Or even car loan debt. Whatever the case may be, if you have a lot of debt, you’re not alone. In fact, according to the U.S. Federal Reserve, roughly 60% of all Americans carry some form of debt. To reduce your debt, start paying off the smallest amount you can pay each month. When you’ve made significant progress, you can start adding in additional payments. You may need to sacrifice some of your other spending habits to be able to make this happen.
Pay Off Credit Card Debt
How many people have been living under the threat of late fees and high interest rates because they couldn’t afford to pay their credit card bills on time? The consequences of falling behind on your bills can be devastating. For some, the threat of foreclosure is real. Others struggle to maintain a decent credit score to qualify for better deals on other services. I personally know people that have three or four credit cards constantly maxed out and they just make the minimum payment on them and when they can they charge more on the cards. Keeping the cards maxed out. You will never get ahead that way. Getting these high interest rate credit cards paid off once and for all is essential for protecting your personal assets. We all need to have a credit card for not only convenience but also for traveling and making purchases online. However, once you get them paid off make sure you can pay them off every month so that you do not incur all the interest.
Pay Off All Other Debts
Getting out of debt is no easy endeavor. In fact, it is much easier to get into debt than out of it. Here is what I did years ago to get out of debt and stay out of debt. I did the snowball debt payoff. Pay the smallest debt as fast as possible. Pay minimums on all the other debts. Then add the extra toward the next largest debt. For example, lets say you have four areas of debt that takes all your extra money to pay each month.
1. New furniture — $300. Monthly payment $10
2. Replaced Refrigerator — $500 Monthly payment $15
3. Fishing Boat — $1500 Monthly payment $75
4. Credit card — $4200 Monthly payment $89
5. Vehicle loan – $20,000 Monthly payment $353
Simply make minimum payments on them all except the smallest. In our example that is the $300 furniture debt. Find that extra money wherever you can ethically find it. Maybe a garage sale of sell your stuff on an online marketplace. Take what you earn and use it to pay off the $300 as soon as possible. Then that $10 minimum payment is added to the minimum payment on the $500 debt. Continue to sell more stuff laying around or find a side hustle and pay all the extra on the $500 until it is paid off. Now continue the process and you will be amazed how quickly you will be debt free. Now you can build your emergency fund to help in protecting your personal assets.
Protecting Your Personal Assets by Building Wealth?
Are you afraid of losing everything you’ve worked hard for? It’s not surprising if you are. While some people see financial security as being synonymous with having a lot of money in the bank, there’s actually another side to this story. Financial security means being able to take care of yourself and your family even when unexpected expenses come along.
Find a Way to Generate Cash Flow
There are several ways to do this: you could become your own boss and run your own business, you could start a side hustle, you could even go back to school and start a small business part-time. The key here is that whatever you choose, you have to find a way to generate money, either through passive income or by generating active income.
I started two small business to get my cash flow going. The first, I started with just a few dollars and slowly built it until it was passively bringing in some decent cash flow. The second we began using the cash flow from the first. These two business are both fairly passive now, taking only a couple hours per week for me to manage. I live a very meager lifestyle, by choice, and these two businesses could easily pay all my bills and more. However, I have decided to use them by protecting my personal assets by building wealth. I also know that not everyone wants to start a business. In that case, there are plenty of part-time jobs out there for you to add to your income and get those debts paid off and build wealth.
Don’t Spend More than You Earn
Live within your means! This is one of those things everyone knows, but no one really follows. It’s easier said than done. When you can’t afford it, don’t buy it. So many people spend more than they earn, only to feel ashamed and depressed, but there’s no shame in being careful with your money. In short, the less you spend, the more you make.
If you are worried about having enough money to pay your bills and other expenses, then you need to make some changes in your life. You should stop spending so much money. Don’t borrow money from anyone and don’t buy anything unless you have the money to pay for it.
In conclusion, You will need to be prepared for inflation by protecting your personal assets and minimizing your debt. With the increase of inflation, your savings will become less valuable and your debts will become more costly. But, when you are in control of your money and minimize your debt, you can be ready for inflation by choosing to save money instead of spending it.
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