Inflation: A Reason to Worry….Or A Call to Action?

Even the wealthiest worry about money. Their biggest fear: Inflation.

Inflation is, indeed, a ravenous creature that devours our cash like a caterpillar on a leaf—slowly, methodically, little bits at a time.

For years, however, inflation has stayed quite low. But that’s rapidly changing. Inflation has hit its highest rate in more than 40 years. And it’s expected to keep escalating.

Is it time to start worrying? Heavens NO! The worst response to climbing costs (or most anything else for that matter) is to go into fear, which tends to have a paralyzing effect.

Instead, look at rising inflation as a resounding call to action…no matter how much or how little money you have.

The only way to counter the ravages of rising prices is to make sure at least some of your savings is working harder than it would in a bank. How? By investing in assets that grow faster than what inflation takes away.

Start by making sure your money is well diversified. Here’s the standard rule of thumb for investing wisely:

• Money you need in the next 3 to 5 years--for emergencies, unexpected expenses, or short-term goals–should be in cash or cash equivalents like money market funds, CD’s, or short-term treasuries.
• Money you’ll need in the next 5 to 10 years should be in a mix of conservative, steadily growing stocks and bonds.
• Money you won’t need for 10 or more years should be mostly in stocks and perhaps commodities and real estate.

You can’t eliminate inflation. But you can do a lot to protect yourself from it.

What immediate impact is inflation having on your financial situation and what steps are you taking to fight it? Share in the comments below.