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How To Overcome Inflation With 4 Simple Tricks

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how to overcome inflation

Have you ever felt like the world has suddenly turned upside down? Is there a moment in your life when things felt like a disaster? As someone who lived through the 2008 Recession, I know what it’s like to lose your cool. Whenever financial panic sets in, you might feel like you have to sell everything or save all your money.

However, that kind of attitude won’t teach you how to overcome inflation. It might seem right, but that’s only your fear taking control. You also can’t live your life acting like things will never go wrong. As history has shown, stock market crashes and inflation surges will happen at some point, whether that’s in a year or in a century.

So, how do you prepare? The best way to learn how to overcome inflation and money crises is to control how you react. Here’s what you need to know about financial panic and how to tackle it.

What is financial panic?

Financial panic is what happens when an economic crisis occurs. Typically, this occurs when something useful, like stock shares or real estate, falls in value. Due to the sudden or steep change in value, both investors and consumers might freak out. For example, stockholders might sell all their shares to try and salvage their money.

how to overcome inflation panic

The ironic thing about financial panic is that it always happens when before, during, or after a boom period. When things go well in the economy, it’s hard to imagine a scenario where they turn for the worse. For example, prior to the 2008 Recession, there was a gigantic boost in subprime mortgage lending. So many loans were handed out to homebuyers who had lower credit scores. In other words, the people who had these loans would likely find it hard to cover their payments. The result? Multiple payments got defaulted and the economy took a tumble. 

The scariest thing about financial panic is that it can cause things to get worse over time. When the 2008 Recession hit, several investors tried to salvage their money by selling their stocks immediately. I myself ended up selling some valuable stocks at the time; only now, with hindsight, do I realize how foolish that is. The last thing you want to do is to make a hasty decision with your cash, only to realize that it was a bad call. That’s why financial panic can be dangerous, especially if you listen to your gut more than your mind. The only way to avoid these kinds of mistakes is to learn how to overcome inflation.

What is causing this financial panic?

Given that financial panic causes a lot of money problems, it’s important to know what could cause it. Why are people freaking out and making rash decisions with their savings? Here are three possible reasons why you and others might get caught up in the financial panic.

Fear of inflation

According to Lynn Franco of The Conference Board, the general mood of consumers before and during a recession is cautious. Many people are afraid of the rise in prices, even if doesn’t last for a long time. That kind of nervousness can deceive you into having low expectations for the future. One reason why that could be the case is inflation.

Inflation is what happens when the general rate of prices rises for a certain period of time. It’s a silent killer that can add a few cents or dollars to your everyday purchases. What makes it scary is that it forces you to spend more on the things you want and need in your life. Just last year, the Headline Consumer Price Index (CPI) rose by 9%.

Even though inflation has fallen down, with the Headline CPI now at around 6.5%, the fear is still there. A survey by Ipsos showed that inflation is the number one worry among people in the US at 43%, ranking higher than poverty (32%) and crime (28%). If left unchecked, it could cause people to freak out should the prices rise up again. In other words, learning how to overcome inflation can help you and others overcome these fears. The prices might not fall, but the methods you learn can give leverage.

Fear of insufficient funds

One prominent reason why financial panic sets in could be a lack of funds. Many people are afraid of not being able to afford what they need. It’s one of the reasons why so many investors and stockholders lost their cool during the 2008 Recession. In their minds, they were about to lose a good deal of money spent. It’s scary to imagine losing lots of cash, let alone losing so much that you end up broke. 

Interestingly, this kind of fear can be controlled if you plan ahead of time. For instance, an emergency fund can be the very solution you need to stay afloat when things go bad. If you have enough money saved to fend for yourself for the next four months, it’ll be easier to stay calm and focus on the next step. Otherwise, you’d never be able to focus on how to overcome inflation.

Sadly, there aren’t a lot of people who make an emergency budget as part of their finances. A survey by GOBankingRates showed that over 50% of Americans don’t have ANY emergency funds. Those that do vary greatly in amounts; of the people who have emergency funds, around 15% save only up to a thousand bucks at most, while 9% have managed to secure five-figure savings for emergencies. The rest vary between having between $1000 to $10000 as their go-to funds. When you consider those percentages, it’s not surprising that a rise in prices would make you worry about how much money you can spare.

Fear of another financial crisis

Lastly, financial panic can be felt when you worry about suffering another crisis. As mentioned earlier, inflation is still the number one concern among people in the country. Even if the rates have fallen and costs are stabilizing, you might find yourself wondering about the next recession.

You wouldn’t be the first one to feel that way. A lot of investors and financial experts keep their eyes on the rates and percentages of the economy. Some of them might constantly worry about having to go through a crash of some sort. Whether it’s cryptocurrency or food and water shortages, there is always something that they pin their fears on.

How do I overcome financial panic during inflation?

Inevitably, inflation will come again at some point in your life. The last thing you want to be is unprepared. That’s why you should learn how to overcome inflation and avoid financial panic. To help you, here are four key methods to remember.

1. Keep calm and re-assess.

The first step in any emergency, especially a financial one, is to remain calm. Though the idea of losing your money is scary, you should remember that freaking out will not help. Letting your emotions run wild can lead to hasty decisions that could hurt your finances and make you more anxious.

To keep calm, remember that not all investments will be negatively affected. There’s still a chance that your money will be safe. Even if it is affected, it’s not going to immediately lead to bankruptcy or debt. Always think to yourself that you have to breathe in and breathe out. You can even start counting from one to ten to try and get your mind to focus.

Once you cool off, it’s time to ask yourself two important questions. The first is “How much of my earnings are liquid at the moment?” and “How much money can I spare for future investments?”. The first one is about finding out which of your assets can become cash. 

Knowing which ones can become liquid is a great way to start thinking about how to overcome inflation.

Some options, like stock shares and checking accounts, can give you funds quickly. Having some source of money at hand, especially for paying any necessary bills, will help you survive inflation. The second one is more about saving for your future opportunities and needs. Things like retirement plans and insurance policies can go a long way to protecting your cash. The sooner you consider them now, the easier it’ll be to manage them. Plus, it’ll protect you from financial panic when an emergency arises.

2. Focus on what you can control.

It’s also important to remember that you can’t control or stop inflation. The rate will go up or down however it pleases, whether it helps your future or not. Worrying about the percentage will not solve your dilemma. Instead, look to what you can control and manage.

For instance, you can take a look at your expenses. There are many purchases and costs that you can make in your life. Some, like housing bills and utilities, are going to be non-negotiable needs. Others, like cups of coffee or fine dining, can be tempered. What you need to do is to consider which costs you can reduce. It might be tough, but it’ll help you save money and protect your future in the long run.

Another thing to remember is that you can’t always take risks. Sometimes, people get bold and try to go for risky payoffs or investments during inflation. In their minds, the payoff will be worth all the expenses taken. However, the truth is that you can’t always bank on a miracle. Playing it safe, even if it takes a while, is better than trying to do the impossible.

So, if you’re wondering where you can put your money, consider saving them in a bank, rather than putting them on risky investments. It might not grow your money as much, but it’s going to keep it safe and secured. As long as you know what you can change, you can discover how to overcome inflation.

3. Be ready and willing to compromise.

Change is never easy and nothing can be earned without sacrifice or hardship. When it comes to inflation, that means you’ll have to compromise at some point. Sometimes, you need to focus on the big picture or the long-term goal. Things like saving money and protecting investments could mean cutting out your luxuries.

how to overcome inflation compromise

So, once you review and assess your portfolio, take the time to see which assets to keep and which ones should be liquidated. See which priorities stick out the most to you and how you can achieve them. Perhaps you need to renegotiate a loan plan to afford your monthly needs. You might also need to give up some assets or change parts of your life. It’s not an easy road, but learning how to overcome inflation means making tough choices when needed.

4. Do not panic and sell.

This might sound the exact same as the first advice, and it is–in a certain way. Again, you must remember to keep calm and avoid panicking. However, this doesn’t only apply to your first reaction to inflation or price jumps. Make it a priority to always examine and consider things first before you decide. Inflation doesn’t have a fixed expiration date. It can take a few months or several years, depending on how the economy goes. What matters is that you always remain alert and collected when you plan your finances.

To make things easier, don’t go out and try to make risky investments or follow the lead of other investors. They might panic and sell their stuff, but that doesn’t mean you should. Instead, look at what safe and proven assets can help you grow as time goes on. Playing it carefully is better than trying to get a big reward at a great cost. Make sure you also review how inflation is going and what changes experts predict.

If you still need guidance on how to overcome inflation, do yourself a favor by talking to a professional. Financial advisors can help you examine your own portfolio and recommend the best course of action. Not only do they try to save your money, but they suggest ways you can do so that fit your life. Above all else, always remember that they are professionals. They have spent years helping people take care of their money. As long as you find one you can trust, you’ll feel a lot safer and happier with their advice.

Takeaways:

  • Financial panic occurs during economic crises. This can lead to hasty decisions that can harm finances.
  • There are several factors that can cause financial panic, include fear of inflation, insufficient funds, and the possibility of a financial crisis.
  • Learning how to overcome inflation and financial panic requires a few steps. The first step is to stay calm and reassess your financial situation.
  • Secondly, it’s important to focus on what you can control, such as expenses and risk-taking.
  • Thirdly, you must be ready to compromise and make tough financial choices. This might include cutting down on luxuries or postponing financial goals.
  • It’s crucial to avoid panic selling, since it’s a hasty choice that only leads to more problems. Instead, look for professional advice from trusted friends and financial experts.
  • Remember that keeping a level head and making informed decisions are crucial to protect your finances in any crisis. By doing so, you can discover how to overcome inflation
Article Sources

  1. Ali, M. (2022, July 25). How I Deal With Inflation -How I Overcome Financial Panic During Inflation Surges. YouTube.  v=X08OvOF6ktc
  2. Chen, J. (2022, August 4). What Is a Liquid Asset, and What Are Some Examples? Investopedia. 
  3. Corporate Finance Institute. (2022, December 28). Financial Crisis.
  4. Fontinelle, A. (2021, February 26). 10 Ways to Prepare for a Personal Financial Crisis. Investopedia.
  5. Hartman, M. (2022, November 30). Consumers are worried about the economy. They’re also spending up a storm. Marketplace.
  6. Ipsos. (2023, February 23). What worries the world – February 2023.
  7. Lisa, A. (2023, February 15). Here’s How Much Americans Have in Their Emergency Funds. Yahoo! Finance. 
  8. Q.ai – Powering a Personal Wealth Movement. (2023, February 7). What’s The US’ Projected Inflation Rate In 2023? Forbes. 

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