Last Updated on December 22, 2020
There are very few things that are certain in life. Along with death and taxes, you can always count on inflation and economic instability.
Economic factors like inflation and economic collapse can quickly erode the value and purchasing power of your money. While inflation has been low over the last few years, it won’t stay that way forever. Inflation was a major cause of the 2008 recession, after all. And there are plenty of red flags that we might be facing another recession in the near future.
If you are pursuing financial independence in any form (such as Coast FIRE or Barista FIRE) or are serious about saving for your retirement, you likely have investments. Investments that you’d like to keep.
With that in mind, here are six ways that you can protect your money from economic instability.
Table of Contents
Invest in Gold
Gold has proven to be a good investment during economic instability, and is generally considered to be a safe way to invest. It has historically kept or increased in value, whereas paper currency has not. There is only so much gold available on Earth. We can’t just print more of it.
Many people invest in gold as a way to diversify their investment portfolios, as gold tends to perform well when the stock market isn’t, and vice versa. So if inflation takes hold, the value of gold could soar.
Investing in other precious metals like silver and platinum might also be a good option.
Invest in Real Estate
Real estate has several things going for it. You can borrow money to buy it, which can be a smart money move, especially if you can get a low-interest rate on the loan.
The cost of buying property drastically varies depending on timing and location. Ideally, you’ll want to “buy low” and invest in real estate when and where prices are lower (such as buying property in an up-and-coming neighborhood or buying during a recession) so that you can “sell high” at a later time.
Property also has an income stream attached to it if you rent it out. Being a landlord is a pretty straight-forward way to make some extra money, which is always a good thing. However, this can be a problem if average rental prices in your area are lower than your mortgage payment, or if you end up with a nightmare tenant.
Related Post: Why a Small Home Could Be a Great Investment
Eliminate as Much Debt as Possible
Eliminating as much debt as possible, as quickly as possible is great financial advice, no matter what your situation is or what is happening in the economy.
The last thing that you want during economic instability is a pile of debt looming over your head. If the market takes a turn for the worse, you want to be able to salvage every penny, advises the experts at CNN Money. If too much of your income goes toward loans, a mortgage, or credit card debt (especially if it has a high interest rate), you won’t be in the best position to save money.
Related Post: 3 Smart Strategies to Get Out of Debt Fast
Invest in Stocks
The equity value of stocks are always moving, and inflation plays a part in that. However, stocks have historically held up well against inflation and have been outpacing inflation over the last few years.
Investing in stocks is better for long-term investors, as the ups and downs can make for an extremely volatile ride. When stocks decline, investors might be tempted to sell, fearing that they’ll lose even more. But that risk is part of the reality of investing in stocks. So be sure you’re mentally and emotionally prepared for these gains and losses and understand the risks you’re taking.
You can either choose the stocks you’d like to invest in yourself, hire a financial advisor, or use a robo-advisor to choose for you, depending on how hands-on you want to be, and how much you know about stocks.
Invest in Foreign Currency
Due to the trade deficit in the U.S., it is only a matter of time before the world looks to hedge its dollar reliance and ends its dependence on U.S. money, especially if its economy can’t get back into equilibrium.
As a Canadian, the value of the U.S. dollar significantly impacts our economy and the value of our dollar, too.
To protect your capital from this, you should consider buying currencies from the euro, pound, Norwegian Krona, and yen, and know that your money will likely hold its value if the U.S. dollar dives.
Invest in Alternative Assets
Classic cars, coins, paintings, antiques and stamps are all ways you can stash cash when inflation hits. These types of investments are better at riding out a financial meltdown. Real, tangible items, have intrinsic value and inflation won’t hurt them.
Like any investment, it can be hard to predict which “collectable” will have a greater return than others. So it’s wise to do your research and look into the potential resale value before you invest.
It’s also a good idea to invest in something you actually want to own. That way if it doesn’t pay off in the end, you are still getting some personal value from it.
Don’t Forget to Invest in Yourself!
While this isn’t exactly a way to protect your money from economic instability, investing in yourself will pay off. And it usually comes with a low risk and a low cost.
Figure out how you want to invest in yourself. Physically, mentally, socially, emotionally and/or financially.
What can you do to decrease your expenses? Or increase your income?
What do you need to do to get a better job or a promotion at work?
How can you learn more about investing in the other ways I’ve mentioned so that these investment perform better?
What small, simple changes can you make in your daily life? Such as:
- Eat better.
- Drink more water.
- Turn off the TV.
- Get enough sleep.
- Express gratitude.
- Practice self-care.
- Be creative.
- Talk to a counselor.
- Go for a check-up.
- Challenge yourself.
- Learn something new.
- Reconnect with old friends.
- Make new ones.
- Track your spending.
- Organize your bills.
- Set goals.
- Make a plan.
Anything you do to better yourself will improve your skills and abilities, which makes you a more valuable employee or a more capable entrepreneur or business owner. It will also increase how satisfied you are with how your life is going, and make you a happier person overall.
Being well liked, happy, and having diverse skills will make people want to work with you, which is a round-about way of protecting your money.
Inflation is a way broken economies re-base themselves. The only mistake you can make during economic uncertainty is to ignore it and believe that it won’t happen to you.
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