Winning the war on inflation

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BUSINESS NEWS - Feeling the squeeze of rising prices? If your money doesn’t go as far as it used to, you’re not alone. Higher grocery bills, rising petrol prices, high interest rates and taxes are squeezing household budgets across South Africa.

Inflation steadily erodes your buying power - making you feel poorer even if your income hasn’t changed.

The good news is that you can take practical steps now to protect your finances and even benefit in an inflationary environment.

Revisit your budget: Cutting back on low-value spending frees up cash to put towards essentials, savings or investments.
Focus on reducing expensive debt: High-interest loans and credit cards become even more costly as interest rates go up, so clearing them as quickly as possible saves you money.
Protect your emergency fund: Aim to maintain three to six months of living expenses in a safe, interest-bearing account.
Boost your income through multiple income streams: Upskilling or negotiating a raise can also help you stay ahead of inflation.
Diversify your investments: By spreading your money across shares, inflation-linked bonds, property or offshore holdings, you can position your portfolio in areas that tend to hold up better when prices rise.

Certain financial products can give you an edge in an inflationary environment:

While a Money Market account may not always beat inflation, it may serve as an emergency fund, so make sure the bulk is in growth assets.
A tax-free savings account offers tax-free growth, boosting your real return when invested in growth assets.
A retirement annuity allows tax-deductible contributions and tax-free investment growth, accelerating compounding and helping your savings outpace inflation.
Endowment policies, which are taxed at a lower fixed rate inside the fund, can maximise after-tax returns and protect against inflation’s impact.
Offshore investments add further protection by exposing you to foreign currencies and markets, reducing your reliance on South Africa’s inflation and currency risks. Certain investors should also consider creating offshore trusts, providing a great deal of benefits given the current economic factors.

Everyone’s situation is unique, so consider speaking to a qualified adviser to build an inflation-beating strategy suited to your goals and risk tolerance.