Who said you can't fight inflation?

Inflation continues to plague the United States (and countries around the world), but individuals can fight back. Several strategies can help. Foremost is to remember that inflation is not rising prices. Inflation is the decreasing value of the dollar.

Adaptability and flexibility are key weapons in fighting inflation. There is no easy way out. You can't fight inflation by attempting to continue living as you are living now. The consumer price index as the barometer of inflation has been criticized, because of its rigidity. It does not take into account the fact that when prices of beef soar, many shoppers turn to pork or fish or vegetable sources of protein. Market prices fluctuate constantly, and shoppers react to changes differently. Thus, becoming flexible and changing meal planning, menus, and shopping techniques in response to market changes can mean savings. More time, effort, information, and skill are required, but nobody said fighting inflation was easy.

Earning nontaxable income helps, because the tax man doesn't get a first cut out of that income. Nontaxable income is the money equivalent you earn by doing things yourself or avoiding costs that would otherwise be paid for out of wages or salaries. For example, if you spend two hours travelling to and shopping in a discount store or factory outlet for a ski jacket and save $20, you can chalk up -- not $20 for your two hours but $31.25, if your top tax bracket is 36 percent. You would have to earn $31.25 to pay $11.25 at the 36-percent rate so as to have $20 extra to spend on the ski jacket. Instead of figuring that you saved $20, or $10 an hour, for your time, figure you avoided having to earn an extra taxable $31.25.

Instead of packing your savings account with dollars that continue to lose value, develop your own savings bank of food, clothing, spare car parts, silver coins, and various collectibles, from depression glass to stamps, coins, art, and other items likely to increase in value, such as common hand tools, for example. Investments likely to keep up with or exceed inflation provide a better store of value than cash in the bank.Real estate, gold-related investments, and certain stocks will likely retain their value relative to inflation.

Within limits you are better off to owe people money than to lend money. As a debtor, you pay back loans wth cheaper dollars as long as you have an assured source of dollars from a secure job or investments. You are a lender when you buy bonds, finance a debt, hold a contract, or keep savings in a bank. Prudence , of course, calls for keeping a minimum liquid reserve in cash, even if it may not be earning at a rate equivalent to inflation.

Avoid fixed- and low-return investments, particularly low-yield cash-value life insurance, long-term bonds (unless purchased and sold cyclically to take advantage of price swings), and time deposits.

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