How you can beat inflation

As summing a fixed income, an increase in price of good and services that are consumed by us in our daily lives reduces our purchasing power, forcing us to adjust our living standard and spending pattern accordingly.

People say that the current inflation is a temporary phenomenon and the government is taking various measures to control it. I hear that the monsoon is going to be good and food prices will come down. However, I would still like to take a few steps to combat the current price rise.

Cut the Avoidable Expenses

I love spending money and most of my purchases are impulsive—a shirt I spotted in shop windows,
And interesting coffee table book…… the list is endless. I know I have to keep my monthly spend constant. It can be done without making too many sacrifices, with a bit of discipline and smart spending.
I now look for bargains, defer expenses that are not necessary and just bit more conscious of what I am spending my money on.

Avoid Long Term Deposits

Rising prices are often accompanied by rising interest rates. It has not happened as yet due to RBI’s continued intervention but there is always a like lihood that happening. This means that if ones savings are locked up in deposits or securities based on current interest rates, one will lose out when interest rates rise on such instruments. Hence for the time being, I will avoid long term deposits and stick to shot term deposits.

Don’t Let the Saving Idle

I am prone to having a cash-heavy savings account which earns a nominal interest, not enough to beat inflation. I have started putting my savings in to fixed deposits which gives me a higher return. I have also put some part of my savings in to 12 months fixed maturity plans as they generally give return higher than fixed deposits and relatively safe investment.

Invest in Equity

Generally, the returns from equity have beaten inflation. While the current state of the stock market does not generate too much confidence, I am considering going in for a systematic investment plan and divert a small portion of my saving into equity.

As an old saying goes, “A stitch in time saves nine”.