The world has seen many economic crises, such as the Great Depression, the 2008 Housing Crisis, and the 2000 Dot-Com Bubble Burst. These events were unexpected but hugely impacted the economy for years afterward. Another term for these unexpected events is “hyperinflation,” and it’s worth preparing for the future.
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Along with the extreme rarity and severe impacts of the events mentioned above, the recent pandemic mixed with global turmoil (creating financial crises) has rocked the U.S. economy and the world. These events are also known as “Black Swan events.” It’s essential to be aware of what some common reactions to hyperinflation are, so this is a time to receive affordable financial advice with care:
- Prices on everyday goods could potentially skyrocket
- People may feel a sense of panic as they struggle to make ends meet
- People may hoard goods like perishables such as food which can create a food supply shortage
- Savings deposited in banks and cash can decrease in value since money has far less purchasing power
We don’t want you to have to worry or stress about rising inflation, hyperinflation, or a recession, which is why we are here to help you prepare for this uncertain future by preparing yourself financially.
What is hyperinflation and how will it affect me as an individual?
Hyperinflation is a situation where the inflation rate is so high that it makes it difficult to conduct business and even make everyday transactions.
- The best way to prepare for hyperinflation is by stocking up on essentials like water and canned goods in case you lose access to your bank accounts or credit cards due to system failures or power outages that prevent ATMs from working properly.
- This means that hyperinflation will remove the value of your money over time, making it harder to buy things and services in your local currency (USD).
- According to Investopedia, hyperinflation occurs when prices rise 50% or more in a month; there are usually other symptoms as well.
Why do you think people purchase insurance policies to protect their cars, homes, and health? The purpose is so that your assets will be protected if anything unexpected were to happen. You can’t always control what happens in life, but you can control how you prepare for different situations.
As a financial advisory firm in San Ramon and Newark, it’s our duty to share several ways to prepare yourself financially for hyperinflation.
How can I protect myself from the negative effects of hyperinflation?
When you’re preparing for hyperinflation, it’s important to have an emergency fund. If you have an IRA or 401(k), this is an emergency reserve, but you should discuss how to strategize a plan based on your financial situation. Your financial plan should be comprehensive!
- Take caution in investing this money in stocks or bonds until inflation has been normalized and/or prices stabilize because they may lose value during the inflationary period.
- Consider putting all of your savings into gold bullion bars or coins that are safe with theft and fire insurance. Gold tends to hold its value better than other investments over long periods because it isn’t tied down by interest rate fluctuations like stocks or bonds.
- Find out the latest trends by talking about the stock market with a financial advisor who will explore which companies are performing well with you. Then look into investing in those businesses or buying some of their products!
- Make sure your investments aren’t tied up too heavily in one sector (like gold). If one particular commodity experiences a huge drop-off during a financial crisis, then it could ruin all of your savings overnight!
What are practical tips on how to prepare for hyperinflation?
To ensure your financial confidence in the event of hyperinflation, you can apply these tips to reduce the impact on your household:
- Budget wisely and reduce your spending: If you can cut your expenses, you’ll be able to weather the storm of hyperinflation better than those who are spending more money than they make.
- Start saving for emergencies and other future expenses now so that when hyperinflation hits, you have money readily available to pay off debt or buy some essential items that may not be affordable during times of high inflation.
- Purchase gold, silver, or other precious metals to hedge against potential losses in purchasing power due to hyperinflation.
- Buy things with strong resale value today so you can sell them later when they’re more valuable (or at least break even). For example, comic books might increase in price over time; art could also appreciate significantly.
- Keep your liquid cash in a safe place. Don’t keep it in an account linked to a checking account where you spend money daily.
- Pay down debt as much as possible with higher interest rates before paying off lower interest rates like student loans or mortgages (unless it makes more financial sense because of high credit card debt).
- Some people think it’s easier to file bankruptcy: discuss this with a professional if you think that’s the case for you.
How do I invest my money during a time of hyperinflation?
Again, if you have savings, consider investing them in something that will hold its value and generate income during this uncertain time. If you don’t have savings, now is the time to start saving! This can be done through a variety of methods, including:
- Saving money each month into a separate account, jar, or trusted piggy bank
- Setting up automatic deposits into your investment accounts at work so that money is taken out of your paycheck before you see it (and avoid impulse spending)
What should I do if I am already struggling financially because of hyperinflation?
If you are already struggling financially and need a plan on how to prepare for hyperinflation, discuss taking advantage of tax-advantaged accounts such as IRAs (Individual Retirement Accounts), Roth IRAs, and 401k plans with an affordable financial advisor in the Bay Area. These accounts allow you to save money for retirement without paying taxes on your contributions or earnings until you withdraw them from your account after reaching age 59½.
Of course, getting professional and affordable financial advice near you will be your best bet to survive and thrive in these times.
Work with a financial advisor in San Ramon or Newark at Humanity Wealth through subscription-based financial planning to help you beat inflation and hyperinflation
If you’re looking for a financial advisor in San Ramon or Newark, we can help! Humanity Wealth Advisors has a convenient subscription-based financial planning model for all ages that helps people with their finances in the face of inflation and hyperinflation. We’ll work with you to find ways to invest your money so that it grows at a rate higher than the rate of inflation, allowing you to potentially beat inflation and hyperinflation.
Remember that the economy is always changing, as are you. Financial planning is an essential part of life and should be taken seriously by everyone regardless of the current situation.
By understanding how inflation affects different assets like stocks or bonds, you can make better decisions when it comes time to invest in these markets.
It’s vital to craft a financial plan with your personal advisor to help protect against unexpected events such as hyperinflation so that your wealth remains intact during difficult times. You are not alone. Give us a call, and let’s set a time to explore this important aspect of life together!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.