How to build wealth without sacrificing much during periods of high inflation

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For many people in today’s economic climate, just getting by is good enough. More than half of Americans are living paycheck to paycheck given the record-high inflation rates, making it easy to put long-term goals such as wealth-building on the back burner.

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

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

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

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

If you have some money set aside, consider moving it to a high-yield savings account. While you’re not going to earn an interest rate that outpaces the inflation rate, with banks increasing APYs, or annual percentage yields, you can at least earn a bit more from something you’re already doing anyway.

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

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

LendingClub High-Yield Savings

LendingClub Bank, N.A., Member FDIC

  • Annual Percentage Yield (APY)

  • Minimum balance

    No minimum balance requirement after $100.00 to open the account

  • Monthly fee

  • Maximum transactions

  • Excessive transactions fee

  • Overdraft fees

  • Offer checking account?

  • Offer ATM card?

Pros

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

Cons

  • $100 minimum opening deposit required, though there’s no minimum balance after that
  • No physical branch locations

Don’t hold onto more cash than you need to

The scenario: You’re holding onto liquid cash outside of what’s needed for your emergency fund, monthly bills and the essentials.

You don’t need to keep extra cash on hand just to have it. Inflation makes the cash you’re holding onto worth less, which is, in effect, lessening your purchasing power. If you’re keeping excess cash on hand, consider putting it somewhere that will earn you more. Investing it into the market to grow is a good way to protect its value and combat inflation in the long run (more on this next).

Continue to invest, especially in a retirement plan

The scenario: You’re already contributing a portion of your paycheck to the market.

According to a 2022 Gallup survey, over half (58%) of Americans are reportedly invested in the stock market, whether it’s through an individual stock, a mutual fund or a 401(k) retirement account.

If this is you, continuing to do so is a smart move. Despite how the market may be moving today, investing is generally advised to help beat inflation — that’s because the long-term returns will generally outpace it. Historically, the S&P 500 has shown an average annualized return of roughly 10%, though past performance is no guarantee of future results.

“The magic of compound interest and consistent savings habits are key to building wealth over time through all types of market conditions and economic environments,” Sara Kalsman, a certified financial planner at Betterment, an investing investing robo-advisor, tells Select.

Continuing to invest in a retirement plan is especially important because accounts such as a traditional IRA or Roth IRA offer tax advantages that ultimately reduce your tax burden, ensuring you’re paying less on your investment earnings.

If you don’t yet have a retirement account open, a Roth IRA is a good place to start since it can help offset inflation’s impact when you withdraw. With Roth IRAs, you’ll pay taxes upfront by contributing after-tax dollars and later in retirement, your withdrawals are 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 big-name brokerages, such as Charles Schwab or Fidelity.

If you’re already contributing to an employer-sponsored retirement plan such as a 401(k), keep it going so that, if offered, you’ll score an employer match and have even more of a nest egg growing in the market.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

  • Bonus

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

Be mindful of taking on any additional debt

The scenario: You’ve already thought about taking out a loan but haven’t done so yet.

Given the increased interest rates on debt — including everything from a mortgage or auto loan to credit cards — be wary of borrowing right now. Financing is quickly becoming very expensive, so it may be best to wait it out if you can.

“The more control you have over your spending during periods of high inflation, the less impacted you’ll feel by the rising cost of goods and services,” Kalsman says.

If it’s essential for you to get a mortgage, or another type of loan, make sure you prep your credit score and find the best lender to get the lowest interest rate. For example, SoFi offers a 0.25% rate discount when you lock in a 30-year rate for a conventional loan, while another special gives customers up to $9,500 in cash back when they purchase a home through the SoFi Real Estate Center, which is powered by HomeStory. SoFi members can also get $500 off on their mortgage loans.

SoFi

  • Annual Percentage Rate (APR)

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

  • Types of loans

    Conventional loans, jumbo loans, HELOCs

  • Terms

    10 – 30 years

  • Credit needed

  • Minimum down payment

Terms apply.

Bottom line

While the prices of everything around us don’t seem to be going down anytime soon, remember that some of the financial habits we may already be implementing are helping us to build wealth despite this period of high inflation.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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