Inflation Versus Hyperinflation: Ways To Cope

“… When the Lamb opened the third seal, I heard the third living creature say, “Come!” I looked, and there before me was a black horse! Its rider was holding a pair of scales in his hand. Then I heard what sounded like a voice among the four living creatures, saying, “Two pounds of wheat for a day’s wages, and six pounds of barley for a day’s wages…”

– Revelation 6:5-6 [NIV] –

– – –

“The steps of a good man are ordered by the Lord: and he delighteth in his way. Though he fall, he shall not be utterly cast down: for the Lord upholdeth him with his hand. I have been young, and now am old; yet have I not seen the righteous forsaken, nor his seed begging bread.”

– Psalm 37:23-25 [KJV] – 

When trying to keep your financial boat afloat, it helps to know if the economic waves are going up, down, or sideways. Additional knowledge can help to protect your hard-earned savings, assets, and income. This article discusses different types of inflationary environments and provides you with options for surviving (and maybe even thriving in) them.

– The Problem –

Economy: A term referring to activities centered around the production, use, and exchange of resources and wealth within a community. (Ref: 3, 4) An economy can describe the resource movement in a community of any size. As a result, an economy can describe the resource management of a group as large as an international industry sector  – or as small as a village or family. Economic activities ultimately determine where the resources end up in a community.

Inflation: A decrease in the purchasing power of the currency in an economy. This causes a rise in the overall price of goods, services, and living expenses. (Ref: 5) People spend more money, but they get less in return. 

Deflation: An overall drop in the prices of an economy. This is often associated with buyers being able to purchase more goods with less money. (Ref: 1, 2)

Disinflation: Slowing of the growth of inflation in an economy. This is not a negative inflation rate, only a slower increase. Consumer dollars are still losing purchasing power – but at a less rapid pace. (Ref: 2) For this reason, disinflation should not be confused with deflation.

– Potential Options –

1. Make Inflation Work For You – The long-term goal is to own assets that add to your bottom line and help you keep up with inflation. How do you do this? One option is to buy/invest in resources that will earn you money, go up in value, or do both over time. This puts inflation on your side by making it work for you. — 🤔But what if you don’t have enough money to start this kind of plan? Check out the next option.
2. Live Like You’re Broke To Avoid Actually Going Broke – If you’re fighting to scrape together savings and an emergency fund, it might be time to start living the broke life. Buy only what is needed. Take a break from buying any “wants” until you’re more financially stable. Remember that these don’t have to be permanent changes. You can relax the spendthrift ways as you build savings reserves and additional income streams. Until then, if you have a small savings fund (while friends, family, and neighbors assume that you’re cheap and penniless), you’re kind of doing it right. 🙃 — 🤔But what if it’s taking too long to build your funds for saving and investing? Have a look at the next option.
3. Learn To Earn While You Sleep – The major problem with inflation is that it weakens your dollars’ buying power faster than you can earn more of them. To fight this issue, a person has to earn A LOT more dollars than they are used to generating. Because there are only so many hours in a day, a person eventually runs out of time to trade for more money. Even if he or she tries to make up the difference with credit cards, they run into the fact that credit has limits. At some point, you have to find a way to increase your income in a way that doesn’t take more time out of your day. Enter “passive” income. No, it’s not usually 100% passive, but it does allow you to repeatedly earn money from work that you’ve done in the past or will perform periodically in the future. This approach to income generation is how you free yourself from the hamster wheel of trading time for money. — 🤔Okay, but I need to speed this process up. What can be done about that?
4. Get Rid of Variable-Rate Debt – As interest rates rise, so can the interest charges on variable-rate credit cards, mortgages, auto loans, personal loans, home equity lines of credit, student loans, etc. This basically means that you end up being charged more to pay for old debts. If you have the financial cushion, consider aggressively paying off your variable-rate debt – or at least finding a way to refinance into a loan with a fixed rate. However, it’s important to warn that this is not a beginning step. Consider holding off on aggressive debt repayment if you don’t have an emergency fund or aren’t able to consistently pay all of your bills at the beginning of the month. You really don’t want to send the last of your extra money to creditors. It’s an open invitation for problems to show up and weak havoc on your budget. (… So make sure you’ve put together an emergency fund and backup savings first.)
   

That concludes this discussion of options to help you keep up with economic inflation. If it’s been helpful, you might want to check out the MMT article outlining options for coping with economic recession or depression. We’ve linked it here for easier access. 

References

1. “Deflation: A decline in prices that often signals hard economic times ahead”; Accessed October 13, 2022; www.businessinsider.com/personal-finance/deflation
2. “Disinflation – Definition, Primary Causes, And Example”; Accessed October 18, 2022; corporatefinanceinstitute.com/resources/knowledge/economics/disinflation/
3. “Economy”; Accessed September 30, 2022; dictionary.cambridge.org/dictionary/english/economy
4. “Economy: What Is It, Types Of Economies, Economic Indicators”; Accessed September 30, 2022; www.investopedia.com/terms/e/economy.asp
5. “Inflation: What It Is, How It Can Be Controlled, And Extreme Examples”; Accessed October 18, 2022; www.investopedia.com/terms/i/inflation.asp
6. “Monetary Policy In Emerging Markets” from “Handbook of Monetary Economics”, Published 2010; Accessed October 18, 2022; www.sciencedirect.com/topics/economics-econometrics-and-finance/hyperinflation
7. “Stagflation: Definition, Causes, Examples”; Accessed October 18, 2022; www.businessinsider.com/personal-finance/stagflation

– – –

*** This information is shared by Momma’s Money Tree and D’Loreyn Walker MD, author of “The Proverbs 31 Millionaire”, “God’s Plan For My Money”, and the FREE 5-page PDF “MMT 6-Figure Business Accelerator”. To learn more, visit the Products & Services page of Mommas Money Tree (.com). ***

D’Loreyn Walker, MD is a Bible-based business and finance coach, the author of “The Proverbs 31 Millionaire” and “God’s Plan For My Money”, the founder of Momma’s Money Tree, a retired General and Child-Adolescent Psychiatrist, and a health educator.

– – –

Momma’s Money Tree

– Where The Bible Meets Business & Personal Finance –