How to become financially independent in a high-inflation environment? —Expert decodes

With inflationary concerns rising globally and the Reserve Bank of India (RBI) expecting headline inflation to average well above 6 per cent in the second quarter, it is advisable for every individual to assess their financial standing to fight inflation. 

"In an environment of high inflation, adapting and being proactive with your financial decisions is crucial. Implementing a combination of these strategies can help you protect your assets, maintain your purchasing power, and work towards financial independence despite challenges posed by inflation," said CA Ruchika Bhagat, MD, Neeraj Bhagat & Co.

Here are some expert tips for being financially independent in a high-inflation environment:

-Create and maintain an adequate emergency fund to cover unexpected expenses. 

-Diversify your investments as it helps mitigate the impact of inflation on any single asset class.

-Invest in tangible assets like real estate, precious metals, and commodities that tend to retain value during inflationary periods, acting as a hedge against rising prices.

-Investing in stocks of companies with strong pricing power, stable dividends, and the ability to pass on increased costs to consumers can act as a safeguard against inflation erosion.

- Regularly assess your investment portfolio and make necessary adjustments to align with changing economic conditions. 

-Seek out investments that generate a steady stream of income, such as dividend-paying stocks, rental properties, or bonds with attractive yields, which can help counter the erosion of purchasing power.

-Enhance your skills to remain competitive in the job market. A valuable skill set increases the likelihood of salary increments, promotions, or new job opportunities, helping you outpace inflation.

-Minimise high-interest debt and focus on paying off loans, as high inflation can magnify the burden of debt repayment.

-Explore part-time gigs, freelancing, or small businesses to supplement your primary income and enhance your financial stability in an inflationary environment.

-Research and invest in instruments designed to keep pace with inflation, like Treasury Inflation-Protected Securities (TIPS) or inflation-linked bonds.

-Maintain a stringent budget to track expenses and cut unnecessary spending. Focus on needs over wants to preserve purchasing power.

-Keep a long-term view of your financial goals. Short-term market fluctuations might occur, but a strategic approach helps you ride out volatility and achieve your objectives.

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