Ask Chuck: Help riding out inflation

Dear Chuck,

Inflationary prices are hitting our family, and I am getting worried. What can we do to ride this out?   

Inflation Fears

Dear Inflation Fears, 

Gasoline is way up, oil is way up, food is way up, rents are rising, and housing prices are soaring. The price of used cars is nuts — in my opinion. Inflation is definitely impacting us all!

My wife and I lived through the inflationary period of the ‘80s and survived. We were a young, married couple and didn’t always make the best decisions, like buying our first home with an adjustable-rate mortgage when mortgage rates for 30-year fixed-rate loans hit 18%. But I learned some helpful lessons that I can pass on here. 

Make some key adjustments now

As the price of goods and services increases, our purchasing power decreases. There are several things you should do because things could get a lot worse before they get better. 

It is important to know and understand your true financial picture. Last year, the Penny Hoarder conducted a budgeting survey of 1,900 Americans. Results showed that those who kept a budget were more likely to know how much they spent the previous month and less likely to splurge on a purchase that hindered their ability to pay bills. More than half (56%) of the respondents did not know how much money they had spent the last month.

Of those who use a simple budget, 40% use a spreadsheet, 14% use an app, and 12% use the most basic method of all — the cash envelope system. Here’s how to get started. You may benefit from the advice and helpful assistance of a Crown budget coach.  

• Review your budget and be sure you are living well below your means (income).
• Build or increase your emergency fund to 6 months of your living expenses.
• Consider postponing any large expenditures.
• Ask for a raise or find another way to increase income.
• Diversify your investment portfolio to assets that grow because of inflation.

Prioritize God’s way

Give first to honor the Lord with all that He has provided. He offers us the only guaranteed return with money — treasures in Heaven. After giving, pay yourself next (save); then prioritize what you can spend on your bills. Warren Buffet says, “Do not save what is left after spending, but spend what is left after saving.” This will give you financial margin and increase your options to overcome the erosion of your spending power by being able to invest in assets that benefit from inflation. That is the best way to keep up with the rising cost of goods and services. 

Evaluate your income

Determine if your company is benefiting from inflation or getting hurt by it. If your career is in a field that cannot make adjustments to rising costs, your employment may be threatened should inflation persist. Consider alternative sources of income or begin looking for employment that can endure — or even thrive — during inflation. If you have children nearing adulthood, emphasize the importance of inflation or recession-proof careers. Here are some suggestions along with some work-from-home ideas. 

Hyperinflation

Hyperinflation, though rare, usually occurs when a government prints too much money. The more money in circulation, the less a currency is worth. As value drops, more money is needed, so more is printed, and prices rise faster. Consider what happened in the following nations:

• Germany: After World War I, the Weimar Republic printed money to pay for war reparations.
• Greece and Hungary: During and after World War II, they printed money to cover war debt.
• Yugoslavia: In the 1990s, the central bank printed money to cover debt and theft from a corrupt politician.
• Zimbabwe: From 2004-2009, inflation was as high as 98% per day. Land seizures, drought, and money printed to pay off loans all contributed.
• Venezuela: In 2016, inflation grew out of control after the government printed money to deal with a financial crisis. In 2018, they launched a cryptocurrency because they could not afford to print enough paper money. Many use eggs for money now. 

America is not near hyperinflation levels, although our government has indeed printed an excessive amount of money before and during the pandemic. It is difficult to control inflation, so we must keep a watchful eye for signs that hyperinflation has become a real threat. 

I have traveled to parts of the world where people survived hyperinflation. They have lived through what many would consider the Americans’ worst nightmare: losing all we have in terms of our worldly wealth. Yet the Christians who lost everything really did not lose “everything.” They became rich in the things money cannot buy. They learned to trust God in the midst of their financial pain. Things become less important than relationships. People sacrificially shared with one another and discovered the joy of giving and serving. One family believes it was the best thing that ever happened to them since they gained far more “true riches” than they lost in the temporal wealth of this world. 

Be prudent

I will write more about this as we watch changes in fiscal and monetary policy; however, you are wise to be prudent and make adjustments now. We are not guaranteed what the future will hold, but we can weather all storms when our house is built upon the Rock. 

The Crown Stewardship Podcast is a valuable resource during these uncertain times. It is a wonderful tool to help guide you in the many facets of God’s financial principles. You can subscribe for alerts of new episodes. I hope you find it beneficial.