Even the wealthiest among us—those with earnings over $200,000 or a net worth over $3 million—still worry about money.
Their biggest fear: Inflation.
Inflation is, indeed, a ravenous creature that eats into our cash like a caterpillar on a leaf…slowly, methodically, little bits at a time.
For years, however, inflation has stayed quite low. But that’s rapidly changing. The Wall Street Journal just announced, “US inflation hit its highest rate in more than six years.” And inflation is expected to keep escalating.
Is it time to start worrying? Heavens NO! The worst response to climbing costs (or most anything else for that matter) is to go into fear, which tends to have a paralyzing effect.
Instead, look at rising inflation as a resounding call to action…no matter how much or how little money you have.
The only way to counter the ravages of rising prices is to make sure at least some of your savings is working harder than it would in a bank. How? By investing in assets that grow faster than what inflation takes away.
Now is the time to make sure your money is well diversified. Here’s the standard rule of thumb for investing wisely:
- Money you need in the next three to five years–for emergencies, unexpected expenses, or short-term goals–should be in cash or cash equivalents like money market funds, CD’s, or short-term treasuries.
- Money you’ll need in the next five to ten years should be in a mix of stocks and bonds.
- Money you won’t need for ten or more years should be mostly in stocks and perhaps commodities and real estate.
You can’t eliminate inflation. But you can do a lot to protect yourself from it.
Tell me about your biggest money fear. Leave a comment below.
If you enjoyed this Words of Wealth, click here to receive a copy in your inbox every week.