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Okay millennials… is it safe to say that you all have spent much of your lives during economic calamity?

Remember the dot com bust in the late 2000’s?

How about the great recession in the early 2000’s?

Or the housing market crash in 2008?

COVID-19 and the great resignation? [Cue Beyoncé ‘Break My Soul”

And now, inflation!!!!!

Folks can’t seem to catch a break and it’s a burden for many young professionals who are just starting out in their careers and are hoping to buy homes and start families.

Inflation is hovering above 9%, its highest in 40 years.

What does that mean for people in their 20s and 30s with a growing set of responsibilities and desire to enjoy the fruits of their labors?

Financial Expert, Tax Attorney, and author of Infinity Investing: How the Rich Get Richer and How You Can Do The Same, Toby Mathis shares action steps you can take to navigate long periods of high inflation.

Use the 70/30 Rule to live below your means and avoid debt. 
Living below your means and avoiding debt during the inflationary period. If you are using debt to maintain your standard of living, you have a ticking time bomb on your hands. Statistically, it is only a matter of time before you run out of credit and face financial ruin. The best advice during inflationary times is to live off of 70% of your take-home pay to give yourself some wiggle room as prices creep higher. Use the remaining 30% for giving (yes, he said giving), paying down debt, and investing in fairly equal amounts. If you have no debt, just add that portion to your investing.

Postpone the new car purchase. New car prices have been hovering at record highs, driven by pandemic-related parts shortages, factory shutdowns and a scarcity of computer chips. Used-car and truck prices also have soared 16% over the past year, but have been dropping. These facts tell us to delay any major purchases and to possibly take advantage of the inflated car market if you have a car in good condition to sell. The inflation in used cars can give the seller a nice cash infusion if it is not needed or can be replaced with a car at a lesser cost. Repos are up, so time is on the side of the buyer, and be patient if you are in the car market. If you absolutely must buy a car now, make sure you are doing so without incurring debt on the purchase. Car debt is horrible debt.

Continue investing. If you are an investor, you should be looking at companies that are also “living below their means” – i.e.,  profitable. Look at companies with free cash flow (i.e., ones that bring in more money than they spend) and that share that cash with their shareholders in the form of dividend payouts. You will want to invest in companies that either have proven brand recognition that attracts people regardless of increases in price, or companies that are financially strong and create products that are in demand regardless of inflation.  The classic example of a brand people want regardless of inflation is Coca-Cola. It has prospered during previous inflationary cycles. Examples of brands people need are utilities, mining companies, and even real estate investment trusts (REITs). There remains strong demand for all three even though Inflation is at its highest levels in half a century.

Reduce your expenses. Take a deeper look at your bills and find ways to reduce or eliminate some can make a notable difference in your monthly budget during an inflation crunch. There are really three levels of spending: need, want and wish. Figure out your “need” budget such as rent and food and write it down. Then add in your “wants” – your cellphone, cable, Netflix, eating out, your three gym memberships, etc. – and write those down. Wishes are things like once-in-a-lifetime trips or expensive expenditures. Once you know your categories, concentrate on what items in the wants and wishes list you can do without for now. Those will be your sources of greatest savings. I know it can be painful to cut something you really want and like, but consider it a temporary gesture that your future self will appreciate.  

Laura Onyeneho

I cover Houston's education system as it relates to the Black community for the Defender as a Report for America corps member. I'm a multimedia journalist and have reported on social, cultural, lifestyle,...