Gofreedom financial freedom

A road trip to financial freedom

6 Ways to inflation-proof your life

By Lizelle Steyn

10 July 2022

Photo credit: Sarah Chai

If, lately, you’ve been feeling that you’re getting poorer, you’re not alone. It’s costing 54% more than last year to fill up at the petrol pumps and, if you don’t own a car, you would have felt this in your taxi fare. Food inflation sits at nearly 9% and the increases in medical aid premiums over the past few years have also outpaced consumer inflation. While making your own biodiesel may not be practical, there are a number of other things you can do to inflation-proof your life (or at least parts of it).

1 Invest in companies with pricing power

Some companies have more pricing power than others. In other words, they can keep on raising prices without losing too many customers. These include good real estate companies (maybe not at the moment those who rent out office or mall space), utility and data providers with little competition, and commodities (like platinum) companies.

If you want to learn more about stock-picking, follow The Finance Ghost, who has a freemium business model, and Keith McLachlan, who shares his insights into smaller companies for free. As trading platform I use EasyEquities to buy mostly ETFs, but they are also great for building up an individual stock portfolio, because they’re fun, make it easy to trade, and they’re cheap.

2 Increase your own earning power

We all get nervous when we see our expenses spiralling out of control and there’s no more room to tighten the belt. What we can control, though, is how much money we could potentially earn. One good thing about inflation is that there's also upward pressure on wages and salaries. If you continuously upskill, stay ahead of your game and change jobs to increase your earning power, there’s no reason why your income over the long term should not keep up with the inflationary pressure on your expenses.

Sometimes learning a new skill has the added advantage that you are not only better qualified, but you no longer have to pay someone to do that for you, like learning to build a website for your own marketing consulting business and at the same time being able to win new clients for whom you can build a website. We live in good times - we can learn almost any skill online. For formal qualifications, Getsmarter is a paid online course provider; there are also good free certifications available from the likes of Hubspot and Coursera.

3 Buy inflation-linked bonds

Other than invest in the right companies and in yourself, you could also buy inflation-linked bonds to beat inflation. When you put your money in a normal fixed deposit, the rate stays exactly what the name says – fixed. RSA Retail Savings Bonds with inflation-linked rates work differently in that the interest paid fluctuates along with inflation. Choose between a 3-, 5- or 10-year investment, with the rate quoted as a % above inflation. If the inflation-linked rate is 4% for example and inflation is 7%, you get 11%. That’s great protection against inflation.

4 Let nature provide

Another hedge against inflation, excuse the pun, is letting nature do the growing and multiplication by growing your own food. One onion flower, for example, produces 42 seeds, plus the bulbs tend to subdivide as the plant matures. Let’s face it, nature kicks sand in the eyes of inflation any day. And if every household can replace at least part of their grocery trolley with homegrown fruit and veg, that’s a monthly expense you never have to worry about again.

The easiest fresh products to grow at home are:

All of the above can be grown in pots or crates on a balcony and don’t take up a lot of space.

If you’re on FaceBook, the Livingseeds Veggie Gardeners group is a great place to learn the basics. It was my favourite FB group during the pandemic, maybe because it’s packed with upbeat people who love to grow stuff and who encourage anyone starting out.

Never discourage anyone who continually makes progress, no matter how slow. – Plato.

Then I discovered The Weedy Garden YouTube channel this year and binge watched it like other people watch a Netflix series. David Troop must be the most inspiring gardener on the planet. Kind of like David Attenborough in the veg patch. Now I’m brewing my own soil bacteria, blitz composting and harvesting baby spinach at record volumes. If you too are dreaming of having your own food forest in your back yard, get prepping and planting with Mr Weedy.

5 Own your own home

Speaking of our home environments, a sure way to sidestep rental inflation is to, at some point in your life if you can afford it, buy your own home. This is not categorically a great idea, though, especially if you don’t know which town you’ll be living in five years from now. The cost of selling and buying another home is debilitating. Also, only buy if you can put down a fair-sized deposit to minimise all that interest you’ll be paying. Be especially careful of buying right after interest rates have dropped by a few %, e.g. like we had in 2020 and 2021, or at the start of the interest rate uptick cycle (first half of 2022). Once rates have been rising for a year or two, you can start forming an idea of how high your instalments would be if you accept a loan. If you can afford your loan repayments in a high interest rate environment, you can probably also afford it in a low interest rate environment.

In a rising interest rate environment you might think that it’s a good idea to fix your bond rate – here’s why fixing your bond rate is a bad idea, and other tips when buying property.

6 Become part of a generous community

When you do buy a home, I hope it will be in a safe, like-minded community where people look out for one another and lend a hand with all sorts of stuff. My neighbour and I have a good system going, helped by the fact that between the two of us we have mature trees producing enough fruit for both of us year-long. We don’t barter but rather gift what our gardens give freely to us. I’ve also become friends with one of the nursery owners in town and she has given me berry shrubs and healing plants for free. I, in turn, take her some of my home-grown fruit and she’s always welcome to take cuttings from the more exotic plants in my backyard.

The bottom line is: a neighbourhood where no money exchanges hands is less threatened by inflation. Watch how Mr Weedy exchanged 242 pumpkins for products and services he needed.

Higher inflation looks like it’s going to be around for at least another year. Unless your earnings grow at the same pace, inflation will eat away at your purchasing power. Fortunately, you are not powerless and there are plenty of ways to soften the blow. I would love to hear about all the creative ways you inflation-proof your life.