In one of my previous articles, I researched the prices of some essential food items in the US and the UK, from the same brands and in the supermarkets, to discover if the so-called 8% official inflation is reflected in reality.
Instead, I discovered something much more shocking: multiple food items already surpassed 50% of annualized inflation.
“What to do then?” was one of the questions I received.
How to escape the nearly unavoidable spiral of inflation that (as I explained here) is still far from the end?
How do you escape the economic death trap that can ruin the savings of a lifetime in a matter of years, if not months?
I sought advice from people who had lived through some of the most severe and explosive inflationary cycles of the twentieth century, in countries such as Brazil, Poland, South Africa, and Turkey.
My intention with this article is not to “write and forget.” I’ll be constantly updating it with new insights, practical tips, and pieces of advice from others. To receive them in your inbox, subscribe to my articles.
The 1st Step on How to Survive Inflation: Do Not Stock Cash!
It’s a good idea to keep short-term cash on hand, such as an emergency fund, just in case. However, if you have savings that you don’t expect to use for at least a year, you should consider investing them or purchasing a treasury bond.
Keeping a significant amount of cash in your vault (or, as in the old days, below your bed) is a sure way to lose money. If you stored 40 000 euros in your locker 12 months ago in a country where inflation is 12% per year (like where I live), you have already lost nearly 5,000 euros in purchasing power.
If you don’t trust banks (which is understandable), or if you want to keep your reserves portable, there is another option…
Buy Gold
(or silver, or whatever portable asset you can put your hands on it)
This is a tip that residents of several countries affected by hyperinflation are familiar with.
The author of “Surviving the Economic Collapse”, the Argentinian Ferfal, once said that in his country, Not a day goes by when Argentinians who had money in the bank before the collapse don’t wish they had bought gold.
Buying gold is a good idea during inflation because it holds its value relative to other forms of currency. When the government prints more money, each unit of the currency tends to lose its value.
For example, the US dollar was originally backed by gold reserves when it was first established in 1792. Today, even though the US dollar is no longer officially linked to gold, there have been several occasions since 1971 where the US treasury has had to exchange Federal Reserve Notes for an equivalent amount of gold bullion.
This means that on paper, at least, the US government agrees that the precious metal can be used as a safe repository of value.
Gold is also easily portable since a single kg can hold considerable value (almost 60 thousand dollars by current prices). This is useful during emergencies. As I explained in the article What to Do in Case of War:
You can bury it in your garden, making it much more difficult for looters or an invading army to steal it. Besides, you cannot carry your plasma TV in your pocket when you are escaping from war.
Arbitrate Prices Between Different Stores
A true story: in the 1980s, when Brazil was experiencing massive inflation, it was common for products on the shelves to have multiple price tags, one on top of the other, because they were repriced multiple times before being sold.
When prices rise, many stores struggle to keep their price tags updated, and they do not raise their prices all at the same time.
Therefore, it is possible to arbitrate between different stores for the same products. Eg: Supermarket X will have favorable prices for bread, meat, and fruits, while supermarket Y will have better prices for cleaning products and hygiene items.
I am not suggesting that you drive to both supermarkets. This would be foolish during these times, as gas prices have also risen. However, nowadays, supermarkets frequently publish their prices on the internet, so in a few minutes, you can compare between multiple places.
On a side note: take benefit of every promotion by buying multiple items at once, but more about that in the next paragraphs.
Use the 30-Day Interest-Free Period of Your Credit Card
During the 1980s, both in Brazil and in Poland, people rushed to stores to spend their monthly salaries as soon as they could before prices increased.
You can do that. But there is an even better solution: use your credit card as a 0%, interest-free loan.
When you use a credit card, you are spending money that does not belong to you. Most credit cards have an interest-free period (often 30 days).
So, even before receiving your salary, you can buy (and stock) all the items you require and only pay at the end of your interest-free period, when the prices of the items you purchased are likely to be much higher. However, keep in mind that if you do not pay it on time, the interest rates will severely harm your finances.
Stockpile Food (That Can Be Stockpiled)
During your monthly grocery shopping (I will not even mention weekly because to do weekly shopping during inflationary times is to lose money, both on gas and with price increases. It is also a waste of time) you don’t need to buy only what you need for the next 30 days.
Many foods can be stored for many years. If you buy rice or buckwheat in bulk now and make a six-month provision, you will pay much less than if you bought one-sixth of that amount every month.
You will also be protected from any future shortages (and this is a real possibility due to the disruption of supply chains and fertilizer scarcity).
Some items that you can stock up on are:
- Canned foods (vegetables, fruits, tuna, and meats)
- Pasta
- Rice
- Beans
- Peanut Butter
- Spices
- Vinegar
- Olive oil (and also cooking oil)
- Sugar and salt
- Flour and baking soda.
All of these items have lengthy expiration periods and can be kept in your pantry for a long time.
Stockpile House supplies
Because hygiene and house supplies have longer expiration dates than food, they are even easier to stockpile.
So load up on the items you use every day. You’re unlikely to throw away any of them anyway.
Basic items that you can stock up on:
- Soap
- Detergent
- Bleach
- Toothpaste
- Basic medical supplies
- Shampoo and hair conditioner, etc.
The Queen of All Practical Tips: Buy a Large, Standalone Freezer
If all of the previous items were at least predictable for anyone who has given some thought to how to live under high inflation, this is likely to be a surprise.
When I was a kid in the early 1990s, we had a large, horizontal fridge, similar to those found in supermarkets or convenience stores. Brazil’s annual inflation rate was over 800 percent at the time.
But instead of storing ice cream like in convenience shops, our fridge had meat. A lot of meat. We stocked up on meat because it is a staple in our diet, and the prices were rising every week. Every day, sometimes.
One might think that having a large freezer just to stock meat is pointless if inflation is “only” 20% per year rather than 800% as it was in Brazil. “If you count the price of the energy and the price of the equipment itself, it doesn’t pay off,” one could argue.
Not really. For 4 reasons:
1st — Meat prices may rise much faster than official inflation. Grains (used to feed cattle) already soared by more than 30% only in the last five months.
2nd — Governments may be tempted to impose a price cap on food items, resulting in scarcity. This occurred in Argentina, which, despite being one of the world’s largest beef producers, saw empty shelves after the government capped meat prices.
3rd — You will also save money on gas by driving less to the meat shop.
(Prepare to do some math now)
4th — Meat is a relatively high-value product when compared to other food items, so the costs to store it are offset by the amount you save by stocking up.
The average price I pay for meat (a mix between chicken, pork, and beef) is 7.6 euros per kg (I don’t buy expensive beef cuts, since I consider food more as a fuel for my body than a pleasure)
A €450 horizontal refrigerator (eg: an Electrolux LCB3LF38W0) can store easily 300 kgs of meat.
It uses 318kwh of energy. Here in Poland, this means an annual energy bill of 61.8 euros.
A family of four (two adults and two teenagers) consumes 40kgs of meat per month, so the fridge can keep food for up to seven months.
With a 30% annual inflation rate for meat prices (which is not pessimistic), and an inexpensive meat combination that costs 7.6 euros per kg right now, this fridge would save you 171 euros every six months. In a single year, you would save 342 euros, or 280 euros if we exclude the cost of electricity.
You could throw your refrigerator away and still make a profit in less than two years. However, if you decide to sell it by that time, you may be able to get a higher price than you paid.
Have a Bug Out Bag for You and Your Loved Ones, Just In Case
This may appear overly pessimistic. I predicted in February that the global inflationary cycle would result in multiple “Kazakhstans” (that month, Kazakhstan had a series of large protests that turned into civil unrest, sparked by inflation).
Similar riots have already occurred in Peru, Sri Lanka, and a few other countries, resulting in measures such as martial law or civil conflicts with dozens of fatalities.
Inflation, when out of control, is a serious matter. People may lose the ability to buy food and survive. Take it seriously, prepare for the worst, and hope for the best.
This brings us to the conclusion of our how to survive inflation 2022 practical guide…
Maintain a Positive Attitude (While Remaining Realistic)
Inflation, while it can destroy a lifetime’s savings and everything built over generations of hard work, is not something unknown. Many people went through it and managed to survive with a few tricks (some of them are in the paragraphs above).
This is true for my parents in Brazil and my wife’s parents in Poland. It’s a financial tragedy, but it doesn’t have to be a personal tragedy if you get ready for it. Besides all the bad news, some very specific countries are more resilient than ever to the crises of 2022.
There are even ways to benefit from it, as I pointed out in this article of 2021. There are also some industries that are resilient to inflationary cycles.
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Levi Borba is the founder of expatriateconsultancy.com, creator of the channel The Expat, and best-selling author.