Inflation, according to UAE financial experts, is on the rise as a result of various current worldwide crises. Experts are advising residents to think about how they manage their money to assist them to cope with growing costs.
“Rising prices have a corrosive effect on investments that cannot be ignored.” As a result, we must continually be on the lookout for investments that provide higher returns than inflation,” said Rupert J Connor, Partner, Abacus Financial Consultants.
Individuals have prioritised investments based on their income. However, if you are currently investing, you should exercise caution. Experts suggest not to overlook any company’s, product’s, or services’ accomplishments and returns.
“It’s always crucial to focus on what is the real return or the return net of inflation when looking at assets,” Conor added.
He also recommended residents make long-term investments in shares. “It’s one of the most effective strategies to beat inflation.” Equity investments, on the other hand, typically have a time horizon of at least 5 years, and often even longer,” he explained.
“The compounding effect of such investments over time will allow you to comfortably beat inflation.” A portfolio’s asset allocation is crucial, and it should be globally diversified. Conor noted that this will make a portfolio more steady and less susceptible to domestic volatility and inflation.
Making investments in the financial markets, according to Vijay Valecha, Chief Investment Officer of Century Financial, can help individuals cope with inflation. “In inflationary situations, some asset groups perform well. Tangible assets, such as real estate and commodities, have long been considered inflation hedges.”
He also mentioned that families can hire a financial advisor to help them make the best investments, double-check the strategy, and stay on track.
Budgeting, according to experts, should also be a top priority at this time. If you haven’t budgeted in a long time, getting started now will save you money from the effects of inflation.
During the epidemic, an Associated Press story said cancelling streaming service subscriptions and eating out should be reduced.
Consumers will eventually pay more on any revolving debt if central banks raise interest rates. Credit card interest rates are likely to alter now that rates have been raised, usually within a billing cycle or two.
“A fantastic suggestion is to put a limit to how much you can spend on your credit cards. This prevents you from overpaying and encourages you to plan ahead of time to lower the interest you pay on your loans,” Valecha explained.
Anything you know you want and can afford may be better purchased sooner rather than later to avoid price increases. “The cost of autos, home renovation projects, and vacations have all increased in the last year, and shortages may put even more upward pressure on prices.” If you can afford to make major purchases today, it could save you money in the long run, according to Valecha.
When it comes to renting, the most expensive item, Valecha advises that if a family is paying an extravagant rent or mortgage (more than 25% to 30% of take-home income), they should consider relocating to a new, cheaper property or refinancing their mortgage at a lower rate.
“The family could also consider locking up rents for a longer period to take advantage of any future price increases by landlords,” Valecha suggested.
Families should always have enough money to cover any unexpected expenses. Individuals should aim to save between 25% and 30% of their income.
“A family should always keep a six-month emergency fund to protect themselves against price fluctuations,” says the author.
According to the Associated Press, when borrowing costs rise, higher interest rates trickle down to consumer products like loans and mortgages, making them more expensive.
“However, greater interest rates may apply to deposit accounts, implying that banks may begin to provide higher interest rates on checking, savings, and certificate of deposit accounts.” “No one knows what the future holds, but by changing how you spend and where you keep your money, you may be able to better weather inflation,” the research stated.
The study also recommended that long-term investors purchase bonds. Saving money for the short term or an emergency is a good idea, but if you have money that you won’t use within the year, you should invest in Treasury bonds.
