How to hedge against inflation

When I first started driving, it cost me $13 to fill up the tank of my civic. Now it would cost $40 to fill up the same car. This is called inflation. It’s the fact that prices change over time and our dollar has less buying power than it once had.

If you had $100,000 in 1990, you would need $203,941 right now to have the same buying power. So who really feels this...

If you’re living on a fixed income and you’ve built a portfolio that pays you $5k a month to cover your expenses. With each year, things are becoming more expensive and after a while, your expenses will exceed your fixed income.

Also, inflation really hurts the saver. If you just save and save without investing, your money will not grow at the same rate as inflation. For savers or people who are uncomfortable investing, it’s going to be really challenging to retire even if you’re a diligent saver.

This is a reason why you hear so many people talk about real estate being a great hedge against inflation.

In apartments specifically, when inflation rises, that means rent is increasing as well; which leads to the buildings revenue stream going up. And the buildings largest expense (debt) doesn’t increase. It’s fixed! So we charge more for rent while our debt is decreasing or being paid down. So this is an investment where inflation actually helps.

Inflation is something we all need to think about, especially if our goal is financial independence... so look for ways to at least keep up with inflation (2%) or better yet, to beat it all together!

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