As a humble financial advisor in the San Ramon area, it’s my job to tell you that it’s a fact of life that inflation is part of the human experiences we know it. Historically, it has been a steady increase in prices, but there have been times when inflation has spiked sharply. Yes, inflation can wreak havoc on your finances if you don’t have a plan in place, so prepare for the inevitable and prepare for life’s uncertainties by:
- Understanding inflations impact on investments
- Exploring investments to hedge against inflation
- Having a financial plan in place that equates for inflation
- Sticking to your long-term financial goals
What is inflation and how does it impact investments and financial planning?
We are not here to instill fear; we are here to level the financial playing field and offer financial literacy to the masses! For example, get started in learning what a Bull Market vs. Bear Market is. That’s why we provide subscription-based financial planning in the Bay Area.
As a wealth management financial advisor in San Ramon, it’s our duty to help you understand how inflation can impact your plan and investments.
Fact: inflation is a general increase in the price of goods and services. It can be caused by a variety of factors, including an increase in the money supply, an increase in demand for goods and services, or both. Due to supply chain issues, factors that escalate inflation include global turmoil, natural disasters, and/or pandemics.
The process of inflation occurs when there is more demand for goods than there is supply of them at current prices. This can result in firms raising their prices so they can make more profit on each unit sold. The increased cost of production from higher wages leads to inflation by increasing the price tag on consumer goods sold in stores.
Discuss with a professional at Humanity how much you need to save up before retirement so that your nest egg doesn’t lose value due to inflation.
Explore different types of investments to help you manage inflation
If you’re looking for a long-term investment to help you manage inflation, stocks and bonds are a common way to go. Stocks give you a chance to earn more by investing in growth companies (i.e., companies that are expanding), while bonds provide steady returns over time and are generally considered low risk (as long as their issuer doesn’t default).
A good rule of thumb is that if you have an emergency fund set up with three to six months’ worth of living expenses saved up, then it’s okay to invest some of that money into stocks or bonds instead of keeping them all in cash. Discuss this with an affordable financial advisor in the Bay Area at Humanity Wealth Advisors, as your risk tolerance and time horizon will determine your asset allocation.
“You need a financial plan that is as unique as you! Humanity is an all-inclusive financial advisory firm in San Ramon.” – Harry Sherdil
Why it’s important to have a financial plan in place, even if you’re not worried about inflation
While inflation is not a cause for concern for everyone, it is important to have a financial plan in place. Financial planning can help you reach your goals and avoid costly mistakes. For example, if you are thinking about buying a house but don’t know how much money you should be saving each month to pay the mortgage, it may be worth taking some time to sit down with an experienced professional and come up with appropriate savings targets.
Read: How to Pursue Financial Intimacy with Your Partner
How to create a financial plan that works for you and your unique situation
- Make a list of all your income and expenses.
- Determine how much you have left over after paying for the essentials.
- Figure out how much money you will need for retirement, college, emergency, and other goals.
- Create a budget that fits with those numbers and stick to it.
- If you want a second opinion on your plan, reach out to us!
Tips for sticking to your financial plan and reaching your long-term goals
You should understand that your financial plan is not a set-in-stone document – it’s just as alive as you. It’s important to review it regularly, and if you feel like some changes need to be made, then don’t hesitate to make them with the help of your financial ally.
A professional can help you stick with your financial plan. Humanity Wealth Advisors is here to help you keep track of your own personal financial plan or your business. After all, the point of having an advisor is for guidance along your path toward reaching your long-term goals.
When it comes down to managing your money effectively, use these guidelines to get started.
1. Know your goals.
Before you start investing, make sure your goals are clear.
- Know what you want to achieve.
- Set realistic goals that are measurable and achievable.
- Make sure they are time-bound so you can measure progress against them.
- Make sure they are specific enough that there is no misunderstanding about what the goal is and how much money it will take both now and in the future to reach it.
2. Know your numbers.
An essential part of planning for your long-term future is knowing where you are now, what you want to do and how to get there. For example, if you want to retire in 10 years but don’t have enough saved up yet (or don’t know how much exactly), it’s important to figure out what that gap is so that you can work towards closing it as soon as possible.
What’s even more important than knowing how much money you need right now is understanding why those numbers matter. Inflation matters because it affects the value of our money over time. As inflation rises, $1 today will buy less in the future than it did yesterday—and if inflation rises too high (6% or more), then every dollar you have invested today could potentially be worth significantly less in just a few years’ time!
3. Know your lifestyle.
Knowing your lifestyle and how it can change over time is important. For example, your needs will evolve as you get older and have more responsibilities. The higher expenses of raising a family or paying for college may require more income than you need now.
Even with multiple sources of income and low costs of living in some parts of the country, this still adds up quickly!
4. Plan for the unexpected.
The unexpected can come in all shapes and sizes, whether it’s a car accident, natural disaster, or pandemic. When you have a solid emergency fund to fall back on, you don’t have to worry about what will happen if something goes wrong.
Inflation can make saving money harder than ever before—especially when it comes to investing—but there are ways around this problem. Keeping up with inflation is crucial when building wealth, so make sure you do everything possible to protect your money from its effects!
5. Preparing for market volatility will aid in creating a sense of safety.
It’s important to have a financial plan in place, even if you’re not worried about inflation. A good financial plan gives you more control over your money and can help manage the risk that can come with unexpected interruptions in income or expenses.
Knowing your numbers, your goals, and your lifestyle is the foundation of a good financial plan. It can be challenging to create one on your own, but many resources are available here to help make this process easier for you!
Humanity Wealth Advisors offers subscription-based financial planning for everyone
Financial planning is not only about saving for retirement in uncertain times. It’s an ongoing process that starts with your current lifestyle and financial situation and takes into account how you plan to live in the future. Whether it’s saving for a new home, building credit, paying off debt, or paying for college tuition, a financial plan can help you make smart, informed decisions that lead to greater success in all areas of life.
Our team at Humanity Wealth Advisors has decades of experience helping clients improve their finances through planning and execution. For more insight into how inflation can affect your investments, try an affordable outlet to hire your financial advisor, regardless of your income level or available assets.
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Your next step
Inflation is a reality we all have to deal with, but by planning ahead and making smart investments, you can support your savings and family. If you are looking for help with creating a financial plan, contact Humanity Wealth Advisors today!