7 Wealth Generation Strategies for an Inflationary Environment

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Inflation is currently a global issue, and each country deals with the effects of financial pressures with varying degrees of success. Individuals concerned with wealth generation also scramble to respond to the circumstances.



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One way to stay one step ahead of inflation is by effectively building wealth. This can improve monetary shortfalls in the short term. It can also position an individual’s investment portfolio for accelerated growth when inflationary pressures ease in the future.

Here are some tips to help create a wealth generation strategy in an inflationary environment.

1. Start with some perspective.

It’s easy to feel blinded by emotions when inflation is in the conversation. This can lead to skewed perspectives and irrational decisions.

Wealth Woman warns against giving (or receiving) financial advice in a vacuum. The strategic financial planning firm adds that simply doing what your neighbors or friends are doing is risky.

Despite the emphasis on independence in America, freedom does not always translate to wealth. In fact, for the majority of Americans, true wealth is a pipe dream. This means that they are working with limited resources. When this is the case, it is a bad idea to obtain financial information and come up with generic or formulaic advice.

Instead, it’s important to start by taking a big step back. Consider your entire situation. What are your existing assets? What is your income? Do you still have passive income or is it all still dependent on effort? Will you need to divert existing investment funds to cover basic living expenses as inflation rises?

When you have a solid perspective of your situation—and only then—is it time to start creating a personal and situation-specific strategy for wealth generation.

2. Pay attention to your budget.

It’s hard to invest wisely when your day-to-day activities don’t match your (hopefully) savvy investment moves. That’s why, before looking at big investment opportunities, it’s a good idea to start by reviewing your own budget activity.

You don’t need to create a penny-pinching or airtight budget to be a good investor. In fact, there are many different types of budgets that can meet different needs. The most important thing is that you approach your basic personal finances with a thoughtful and diligent mindset. If you can do that, it can also set the tone for calculated investing.

When it comes to the inflation part of the equation, there are certain things you can do to adjust your budget with rising costs and a weakening dollar in mind. AllCom Credit Union suggests starting by tracking your expenses. This will give you a good idea of ​​where your money is going.

From there, assess needs versus wants. This way, you’ll know which items can go if money runs low. In addition, the finance company recommends basic personal finance activities such as buying in bulk and purchasing well-made or reusable goods.

Struggling with your budget as you prepare to build wealth during inflationary periods has a two-fold effect. It sets the tone for how to handle finances in a challenging fiscal environment. It also ensures that as expenses rise, you won’t undermine the portion of your income that could go towards generating wealth.

3. Learn to set serious financial goals.

It’s nice to daydream. It’s also great to think about possibilities and best-case scenarios for your financial future. However, if you want to create an effective wealth generation strategy when inflation is on the table, you need to consider how to set realistic goals – especially ones that can remain viable in a hostile financial environment.

A good way to filter each financial goal is to put it through the SMART acronym filter. This means checking that each objective is:

  • Specific;
  • Measurable;
  • attainable;
  • Relevant; and
  • Time bound.

By setting SMART financial goals, you can rest assured that you have rooted your current wealth generation strategy in reality and that inflationary winds will not be able to deflect your investment activity.

4. Protect what you already have.

Okay, it’s time to get into the nitty gritty of wealth generation when inflation is a factor. Step one is to consider the investments you already have on the table.

If you have some skin in the game, what steps can you take to minimize the impact that rising prices and a disrupted investment environment can have on your current assets?

Members of the Forbes Financial Council suggest a few different ways to protect existing wealth from inflation, including:

  • shifting your investment allocation depending on your needs, such as moving more funds to dividend-paying stocks;
  • study what drives the market value and investment opportunity with each asset you are considering;
  • diversifying investments to mitigate risk; and
  • identifying entities that can rise with inflation, such as real estate, mortgage-backed securities, and Treasury inflation-protected securities.

As a final note here, the reverse of protecting existing assets is to also focus on certain liabilities.

For example, variable rate debt can become a problem if benchmark interest rates rise to address inflation. When this is the case, paying off floating rate debt can be an excellent way to preserve wealth and hedge against inflationary pressures.

5. Don’t be drastic – but take risks.

We touched on the idea of ​​avoiding emotional investment decisions earlier, but it’s worth repeating.

It is important to think carefully about every investment decision you make. Inflation can be scary, and it’s easy for something like a sudden market move or an announcement of a rate hike to spook investors.

Sometimes a rational response to movement in the market is warranted. But you should never act first and think later.

Instead, always filter your decisions through the question of whether you act drastically or rationally. How does each decision help you achieve those SMART goals you set? Even if your wealth sometimes takes a hit, it’s much better to stay the course when you have a solid wealth generation plan in place than to risk disaster through knee-jerk reactions.

6. Think about the right kind of investments.

The type of investments you choose may change during inflationary periods. For example, CNBC recommends focusing on long-term investments that have a good chance of paying off, regardless of the effects of short-term inflation.

One of the best ways to do this is to look beyond vague dollar valuations in volatile markets. When inflation makes investors uncomfortable, stocks that were previously very highly valued can often be directly affected.

When the market undervalues ​​a quality company, it can provide an excellent long-term investment opportunity that can beat any negative effects of inflation over time. Just remember to always study the quality of a company, not its stock, before choosing to buy.

Another, more subtle wealth creation option that can deliver in spades is a direct investment in your individual career and earning potential.

The newsletter adds that periods of inflation can be a good time to invest in personal skills, make career moves and otherwise invest in a person’s professional future. This kind of forward-thinking activity can put you in an ideal position when inflationary pressures lift and markets pick up speed again.

7. Remain flexible at all times.

It’s hard to talk about things like staying the course and investing long-term and then discuss staying flexible in the same conversation. And yet the two concepts must coexist if you want to generate wealth in an inflationary environment.

The most important thing is to avoid misinterpreting flexibility with financial activity. Staying flexible while generating wealth doesn’t mean moving money between accounts every day or buying and selling investments every few weeks.

Instead, look for small ways to adjust current investment activity in response to ongoing market conditions. For example, there is no investment more long-term than saving for retirement. And yet, there are many ways you can fight inflation while saving for retirement, such as:

  • avoid holding cash for long periods of time;
  • deferral of social security benefits; and
  • diversifying investments by switching to inflation-resistant options, such as real estate.

One of the key items to survive rising inflation while investing is to evaluate… and then reconsider – often. Money.com points out that financial advisors will usually recommend staying in a volatile market, and that’s generally good advice.

However, there are times when change is the right choice, such as if you are still settling on a solid investment strategy.

If you are still in the process of forming a wealth generation strategy, you may need to make changes to how you invest. But you can only find this out if you are willing to assess your situation on a regular basis.

Build wealth regardless of your circumstances

Overcoming unexpected challenges, such as those posed by runaway inflation, is nothing new. This is an issue that investors have faced in the past, and they will continue to face it at times in the future.

The most important thing is that investors come up with sound, personal wealth generation strategies. Done right, it can maximize your chances of not just surviving, but thriving in an inflationary environment.

From gaining perspective and addressing personal budgets to protecting existing assets, diversifying and staying flexible, make sure you have a reliable strategy in place. This can help guide your investment decisions as the country – and the world – continues to grapple with inflation and all the financial obstacles it presents.

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