Bad weather plus inflation could be a disaster for your wallet

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Record-high inflation rates have hit Americans where it hurts: their wallet. What happens if they’re hit with a superstorm? Many fear it’ll flood their credit card balances.

 

That’s the big takeaway from Debt.com’s new Natural Disaster Preparedness study. More than 500 Americans were quizzed on how they feel inflation and climate change will affect their spending.

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Nearly 7 in 10 except to spend more this year due to inflation. Meanwhile, 9 in 10 anticipate more super storms over the next five years as a result of climate change.

 

Howard Dvorkin, Debt.com’s chairman and CPA, feels that could be dangerous for those already struggling to make ends meet.

 

 

“Inflation isn’t just making it more expensive to prepare for a natural disaster, it might be convincing Americans to just forget the whole thing,” Dvorkin says. “Just like Americans who fall behind on their credit cards or student loans, at some point, you become so discouraged, you tell yourself, ‘Why bother?’ Well, whether you chalk it up to climate change or something else, more storms are coming. So you need to protect yourself – and it only costs a few dollars.”

A debt disaster

Roughly 3 in 10 respondents said they previously took on $300 in credit card debt to recover from a storm. Dvorkin has coached Americans on their finances for three decades. He’s heard that devastating story from many in that time – and helped them bounce back.

 

“Natural disasters are one of the leading causes of catastrophic debt,” Dvorkin says. “The others are divorce, illness, and accidents. If they all have one thing in common, it’s this: They can happen to anyone at any time.”

 

In 2020, the American Institute of CPAs conducted a similar survey. At the time, 61 percent of respondents said they “believe they are likely to be personally impacted by a natural disaster in the next three to five years, including one in five (19 percent) saying they are very likely to be personally impacted.”

 

Data from the National Centers for Environmental Information proves they’re right.

As of July 2022, there have already been nine weather events this year in the U.S. with collective damages adding up to $1 billion each.

 

Because everyone is at risk, the only advice is to plan.

Prep your wallet for bad weather

Dvorkin has been stressing the importance of emergency savings for years. There’s no telling what that emergency can be. He recommends having at least three months of living expenses set aside.

 

When a hurricane, flood, earthquake, wildfire, or blizzard hit – the blow will be less severe.

 

Not sure how to get started? Read: 4 Ways to Build Emergency Savings Fast. If you’re too strapped for cash now, check out: How to Pay for an Emergency Without an Emergency Fund.

 

“Anything you sock away for later can help you ease a debt disaster,” Dvorkin says. “If you start now, by the time bad luck catches up to you, it won’t keep you down for long. Financial counselors like me talk so seriously about all debt disasters because we want Americans to be prepared.”

 

This article originally appeared on Debt.com and was syndicated by MediaFeed.org.

 

More from MediaFeed:

9 smart investments to hedge against inflation

 

It’s no secret that inflation has arrived and is here to stay. To protect yourself from the adverse effects of inflation, it’s essential to invest your money in smart ways.

 

 

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A few things can cause inflation, but the most common is when the government prints more money than there is demand for. Printing more money causes the value of each dollar to go down, and it becomes more expensive to buy goods and services.

 

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Inflation can have a lot of adverse effects on the economy. When the value of money goes down, people tend to hold onto their cash instead of spending it.

 

Not spending money can lead to a decrease in demand, which can cause businesses to lay off workers or even go out of business.

 

 

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Inflation can also affect asset values. A decrease in the value of money can lead to a decrease in the value of these assets. For example, when the value of money goes down, it can be more expensive to buy stocks and other investments.

 

 

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There are a few things you can do to protect yourself from inflation. One is to invest your money in assets that will maintain their value over time. Another is to keep up with current events and make sure you know how inflation affects the economy. Finally, make sure you’re not taking on too much debt, as inflation affects this.

 

Here are nine investments that can help you protect your savings from inflation.

 

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TIPS, or Treasury Inflation-Protected Securities, are a type of bond issued by the U.S. government. The value of these bonds increases as inflation rises, so they can be a great way to protect your money from the harmful effects of inflation.

 

The downside of investing in TIPS is that they tend to have a low yield, so that you won’t earn a lot of money on your investment. However, the security of knowing your investment is protected from inflation makes them a wise choice for anyone looking to shield their money from rising prices.

 

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Bonds are another investment that can help you protect yourself from inflation.

Bonds can be a great way to make sure your money is safe and will maintain its value even if inflation rises. When you buy a bond, you’re lending money to a government or company in exchange for regular interest payments over a set period of time.

 

The downside of investing in bonds is that they can be risky if the company or government you’ve lent money to goes bankrupt. So, it’s essential to do your research before investing in bonds and know exactly to whom you’re lending money.

 

DepositPhotos.com

 

Gold is a popular investment during times of inflation, as it tends to hold its value even when the dollar falls. The preservation of its value makes gold an excellent option for anyone looking to protect their money from price fluctuations.

 

The downside of investing in gold is that it can be expensive, and there’s no guarantee that the price will go up over time. So, it’s essential to do your research before buying gold and make sure you’re comfortable with the risks involved.

 

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Real estate is another asset that often performs well during times of inflation. When prices rise, people tend to invest in real estate to earn a higher return on their investment. The earning potential can make real estate a wise choice for anyone looking to shield their money from inflation.

 

The downside of investing in real estate is that it can be risky, and it can take a long time to see a return on your investment. So, it’s essential to do your research before buying property and make sure you’re comfortable with the risks involved.

 

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Commodities are items like gold, silver, oil and wheat used as investments during times of inflation. They are used as investments because they tend to hold their value even when the dollar falls.

 

The downside of investing in commodities is that they can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying commodities and make sure you’re comfortable with the risks involved.

 

NiseriN / iStock

 

Mutual funds are a type of investment that allows you to invest in various assets, including stocks, bonds, and commodities. Mutual funds can be a great way to spread your risk and protect your money from the adverse effects of inflation.

 

The downside of investing in mutual funds is that they can be expensive, and it can take a while to see a return on your investment. So, it’s essential to do your research before buying into a mutual fund and make sure you’re comfortable with the risks involved.

 

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Stocks are another option for protecting yourself from inflation. When you buy stocks, you’re investing in shares of a company. Investing in these shares means that you become part-owner of the company and stand to earn dividends if the company does well.

 

The downside of investing in stocks is that they can be risky, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into stock and make sure you’re comfortable with the risks involved.

 

Pinkypills / istockphoto

 

Silver is a type of commodity that often performs well during times of inflation. Silver performs well because it tends to hold its value even when the dollar falls.

 

The downside of investing in silver is that it can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into silver and make sure you’re comfortable with the risks involved.

 

alexis84 / istockphoto

 

Floating-rate bonds are a type of bond that has a variable interest rate. Having a variable interest rate means that the interest rate will change depending on how the economy is doing.

 

The upside of investing in floating-rate bonds is that they offer a higher return than regular bonds and are less risky than stocks or commodities.

 

The downside of investing in floating-rate bonds is that they can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into a floating-rate bond and make sure you’re comfortable with the risks involved.

 

JJ Gouin / istockphoto

 

Inflation can be a severe threat to your financial security. However, by investing in the right assets, you can protect yourself from its adverse effects. So, before you invest your money, make sure you understand how inflation can impact your portfolio and choose investments that will help you stay ahead of the curve.

 

This article originally appeared on MaxMyMoney.org and was syndicated by MediaFeed.org.

 

 

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Featured Image Credit: AndreyPopov / iStock.

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