For the past week, I’ve been pulling apart the issue of inflation (i.e. rising costs) and the impact it has on women’s finances.
Mostly, it’s because of this article – suggesting that inflation is not really a big deal and we should just all enjoy the learning experience.
That really bugged me. 🦟
So I pulled out my “Pissed Off Woman On Board” sign ⚠️ …
and pushed back with facts and figures.
I argued that a whack ton of women are feeling a financial squeeze thanks to inflation.
Not only is it not a fun learning experience, it’s flat-out hard.
In Part 1 of this 3-part series, I discussed low-hanging-fruit strategies 👉 ways you can cope in the short-term.
That mostly amounts to cutting low-value costs and optimizing your purchases.
In Part 2, I talked about the all-important strategy of growing your income.
If your cost increases are matched by an equivalent relative increase in your income, then you’re covered.
In other words, if your costs go up by $5,000 per year and your income goes up by $5,000 per year, you’re good. You won’t feel the impact of inflation in your day-to-day life.
If your raises are not keeping pace with your increase in costs, I suggested some medium-term solutions to solve the dollars-in issue as quickly as possible.
Those revolve around building key skills that will yield more options and more leverage in the marketplace.
So what’s left?
Once you taken care of the here-and-now, what’s left?
📢 Your future.
This is where the situation becomes even more problematic for women.
you have to consider the long-term effects on your purchasing power.
Today, you’re working to earn money to pay for all the things.
Ideally, you’re also setting money aside in the form of savings and investments to pay for future living costs when you decide to step away from daily work…
👉 whether that’s through full-out retirement
👉 or a partial reduction in work to allow greater time freedom
If you don’t set money aside, then you are either stuck working for the rest of your life (hard pass!)…
or you’re left to depend on the small amount the government hands out via the Canada Pension Plan and Old Age Security (an odd name for a program that pays a maximum of roughly $620 per month at the time of writing; try living securely on that!).
Inflation and your savings
Growing your savings rate – that is, the amount of money you set aside for planned spending and long-term use – is an important strategy in mitigating the short-term impact of inflation.
If you’ve got extra cash on hand, beyond what you need for your regular expenses, you will have a way of dealing with those ballooning energy prices, for example. ⛽
But when that cash is destined for long-term use, like retirement, inflation will take a bite out of its buying power unless that money grows either:
👉 at the same rate as inflation;
👉 or faster than the rate of inflation
Here’s a quick question: What’s the rate of growth of your savings and investments?
If your money is in a savings account in one of Canada’s Big 6 Banks, you’re earning next to nothing – 0.10% at the time of writing.
Even if your money is in a so-called High Interest Savings Account, it’s still earning less than 3% at most institutions.
Meanwhile, the rate of inflation is currently above 6%.
That’s the amount of buying power you’re losing.
Even if your personal rate of inflation (as described in this excellent article) is lower than the general rate of inflation, it’s still higher than the amount of money you’re earning in a savings account.
The take-home message when it comes to your money in the long-term is this:
The growth of your money must outpace the rate of inflation, or the amount you’ll be able to buy with it will dwindle over time.
Why I want you to become an investor if you’re not one already
The only way to ensure your money keeps pace with inflation is to invest it in assets that will beat inflation over the long haul.
What’s more, you want to look for assets that do well in high inflation environments.
In his article How to Invest Your Money When Inflation is High, author Nick Maggiulli shows that three types of investments do well in high inflation environments: equities, REITs, and real estate.
When I first started to rebuild my life after my first husband’s death, I built a real estate portfolio.
While I’m a fan of real estate investing in some circumstances and for some people, I don’t recommend it for all women.
❗The learning curve can be steep and costly if you don’t do your homework thoroughly. That takes a lot of time.
❗It requires a chunk of money and credit.
❗It is NOT passive, despite assertions to the contrary. Even if you’re a hands-off investor, you still have to manage the investment and the managers.
❗It is not always easy or quick to sell when/if you need to.
❗It can be hella stressful.
I have a portfolio of properties, but knowing what I do today, if I had to start all over again, I wouldn’t start with real estate.
I’d build a portfolio in the markets, one small step at a time.
That’s why today I teach women to start by learning the ropes in the stock market first.
If you want to branch out into real estate investing after that, awesome. But first, build wealth in the markets.
Because you can build wealth and protect your portfolio from the ravages of inflation with a simple, evidence-based, easy-to-manage investing system that is doable by busy moms.
Investing is a powerful, long-term strategy to help you create the kind of life you want. One where you don’t need to stress about inflation.
When you have wealth, you have options.
That’s priceless, especially for women.
All you have to do is learn to invest using a research-based approach.
I’ll show you how
This week, I’m going to dive into the world of investing to show you:
👉 why it’s so incredibly important for women
👉 that it’s totally doable by you, even if the idea terrifies you
👉 the dangerous spots you need to watch out for
Knowing how to invest is no longer a nice-to-have for women; it’s a need-to-know.
It’s time to create a rock-solid financial foundation for yourself so that no matter what happens – a pandemic, high inflation rates, whatever else comes your way – you look up and say…
I’m good. 😎
We’ll talk again soon.
PS If you enjoyed my series on inflation and/or you found it helpful, please chime in below and let me know. It helps me to know what lands for you. Plus, I love to hear from you!
Have another topic you want to me tackle? Reach out!
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