How to Build Wealth Without Sacrificing Too Much During High Inflation

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For many people in the current economic climate, getting by is enough. More than half of Americans are living paycheck to paycheck given record inflation rates, making it easy to put long-term goals like building wealth on the back burner.

As we now know, the longer we delay building our wealth, the harder it will be to do so later. The good news is that even with the high cost of living right now, there are still ways to continue preparing for our financial future without changing much of what we may already be doing.

Here are four tips for building wealth without changing too much during times of high inflation.

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Move your emergency fund, or savings, into a high-yield account

The scenario: You are already saving but not in the best place.

If you have cash on hand, consider transferring it to a high yield savings account. Although you’re not going to earn an interest rate above the rate of inflation, banks increasing APYs or annual percentage returns, you can at least earn a little more of something you’re already making anyway .

Compared to a traditional savings account, a high yield savings account offers rates above the industry average, barely 0.10%according to the FDIC.

The LendingClub High Yield Savings account offers one of the highest returns on your money, with an APY of 2.07%. The account also comes with no monthly maintenance fees and no minimum balance requirement – ​​you will just need an initial deposit of $100 to open your account.

LendingClub High Yield Savings

LendingClub Bank, NA, Member FDIC

  • Annual Percentage Yield (APY)

  • The minimum balance

    No minimum balance required after $100.00 to open the account

  • Monthly fee

  • Maximum transactions

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Advantages

  • Strong APY
  • No minimum balance required
  • No monthly fees
  • Free ATM card and no ATM fees

The inconvenients

  • Minimum opening deposit of $100 required, although there is no minimum balance after that
  • No physical branch

Do not keep more money than necessary

The scenario: You keep cash aside from what you need for your emergency funds, monthly bills and essentials.

You don’t need to keep extra cash on hand just to have it. Inflation decreases the value of the money you keep, which, in effect, decreases your purchasing power. If you keep excess cash, consider putting it somewhere that will earn you more. Investing it in the market to grow is a good way to protect its value and fight inflation in the long term (more on this).

Continue to invest, especially in a retirement plan

The scenario: You already pay part of your salary on the market.

According to a Gallup Poll 2022more than half (58%) of Americans are believed to be invested in the stock market, whether through an individual stock, mutual fund or 401(k) retirement account.

If this is you, continuing to do so is a smart move. Despite how the market is moving today, it is generally advisable to invest to help fight inflation, as long-term returns will generally exceed it. Historically, the S&P 500 has posted a average annualized return of around 10%although past performance is not indicative of future results.

“The magic of compound interest and consistent saving habits are essential for building wealth over time in all types of market conditions and economic environments,” said Sara Kalsman, Certified Financial Planner at Improvementan investment robo-advisor, says Select.

It’s especially important to continue investing in a retirement plan because accounts such as a Traditional IRA or a Roth IRA offer tax advantages that ultimately reduce your tax burden, ensuring you pay less on your investment income.

If you don’t yet have an open retirement account, a Roth IRA is a good place to start because it can help offset the impact of inflation when you retire. With Roth IRAs, you’ll pay taxes up front by contributing after-tax dollars and later in retirement your withdrawals will be tax-free (as long as your account has been open for at least five years). You can open a Roth IRA at any of the major brokerages, such as Charles Schwab Where loyalty.

If you are already contributing to an employer-sponsored retirement plan such as a 401(k), continue it so that if offered, you will get employer matching and have even more nest egg. growing in the market.

Charles Schwab

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing via Schwab One® Brokerage account. Automated investing with Schwab smart portfolios® requires a minimum deposit of $5,000

  • Costs

    Fees may vary depending on the investment vehicle selected. Schwab a® The brokerage account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for 4,000+ mutual funds, and $0.65 fees by option contract

  • Prime

  • Investment vehicles

    Robo-advisor: Schwab Smart Wallets® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Legacy and Custodial IRAs; plus, a Personal Choice Retirement Account® (ECRP) Brokerage and negotiation: Schwab a® Brokerage account, brokerage account + specialized platforms and support for trading, Schwab Global Account™ and Schwab Organization Account

  • Investment opportunities

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Complete retirement planning tools

Be careful not to incur additional debt

The scenario: Have you ever thought about taking out a loan but haven’t done so yet?

Given the rising interest rates on debt – including everything from a mortgage or car loan to credit cards – beware of borrowing money right now. Financing gets very expensive quickly, so it’s best to wait if you can.

“The more you control your spending during times of high inflation, the less you’ll feel affected by the rising cost of goods and services,” Kalsman said.

If getting a mortgage or other type of loan is essential for you, be sure to prepare your credit score and find the best lender to get the lowest interest rate. For instance, SoFi offers a 0.25% rate reduction when you lock in a 30-year rate on a conventional loan, while another special offer offers customers up to $9,500 cash when buying a home through SoFi Real Estate Center, which is powered by HomeStory. SoFi members can also get $500 off their mortgages.

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed and adjustable rate mortgages included

  • Types of loans

    Conventional loans, jumbo loans, HELOC

  • Terms

  • Credit needed

  • Minimum deposit

At the end of the line

While the prices of everything around us don’t seem to be falling anytime soon, remember that some of the financial habits we may already be putting in place are helping us build wealth despite this time of high inflation.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

About Melanie Tweed

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