5 ways to maximize your wealth during inflation

While US inflation is experiencing its sixth-straight month of decline, the consumer price index is still up 6.5% from 2022. Inflation affects everyone. It can be especially challenging for those who are trying to build and maintain wealth. With the right strategy and mindset, however, it’s possible to maximize your wealth even in an age of inflation.

Where to begin? A recent NY Fed survey discovered that consumer spending growth is slowing down, especially when it comes to large purchases. While this is good for individual households, experts worry about the impact on the overall economy.

In fact, despite slowing rates of inflation, economists predict that there will be a recession sometime in 2023. Some have even dubbed it a “richcession” due to the target demographic it will most likely affect.

Still, inflation is currently affecting all Americans. According to The Bureau of Labor Statistics, Americans are spending 11.8% more on groceries than a year ago. With everyday expenses skyrocketing—according to the same bureau, eggs cost over double what they did last year—it can be challenging just to feed your family, much less save (and make) money.

Despite all of the confusion and conflicting messages being traded online, it’s still possible to protect (and even grow) your assets in the coming year. Here are some strategies for doing just that.

5 steps for maximizing your wealth

One of the most important things to keep in mind is the power of compound interest. This is the interest you earn on both your original investment and the interest that has already been earned. By investing in a high-yield savings account or long-term investments, compound interest will make your wealth grow over time. Just read the fine print when it comes to the rates that your financial service is offering: you’ll want to ensure your balance compounds on a frequent schedule and that the rates aren’t variable.

Another key strategy is to diversify your investments. Instead of putting all of your money into one stock or one investment, spread your money across a variety of different investments. This will help to minimize your risk and maximize your potential for growth. Take note: while investment vehicles like I Bonds are beloved by risk-averse investors, they aren’t always the best course of action if your goal is to maximize your wealth.

Investing in real estate is often considered one of the most effective ways to protect your wealth from inflation. Real estate tends to hold its value over time, and as inflation rises, so does the value of your property. Additionally, investing in real estate can provide a steady stream of income through rent. Make sure to consider geography if you go this route: climate change is impacting the reality of the real estate market in profound ways.

It's also important to focus on increasing your income. This includes securing a higher-paying job (easier said than done, certainly, though the job market has been in the worker’s favor),  starting a business, or building up a side hustle. The more money you have coming in, the more you can invest and save for the future.

Finally, be mindful of your spending habits. By cutting back on unnecessary expenses and living within (or even below) your means, it’s easier to save money. Defining your needs and pushing aside your desires is a good practice at all times, but especially during periods of inflation.

Looking ahead

While inflation can be a challenge, it's possible to maximize your wealth by taking advantage of compound interest, diversifying your investments, investing in real estate, increasing your income, and being mindful of your spending habits. By following these strategies, you can take control of your financial future and build the wealth you need to secure a comfortable retirement.