Inflation in our life

Hi,

we all know it, we all are affected by it, the dreaded inflation. Well, in some cases, used wisely, it can be also a good thing, for personal finance. I will get deeper into the post why it can be good and how this can be achieved. It is not easy, keep this in mind.

My wife is always telling me, that food got so expensive lately. We look at eggs, as we buy bio-eggs, and they are 0.39 € a piece, bought in 10 eggs package. Two years ago, the same eggs, from the same supplier, were at 0.28 €, which is quite an increase, almost 30%. We have noticed, on the small marked-up items, the impact of the inflation is much higher than on the expensive ones. Here we stick to our items, and we don't go for lower quality ones. We try as much as it can get, to have the same standard of life and quality of our food.

So, now, how we counter inflation. At work, I have a clause, that there must be a yearly raise, matching the inflation. This helped me a lot in recent years, as the official inflation was matched, beside the increase of salary. I don't have a deflation cause.

Another thing is to have a fixed rent, stipulated in the contract. Also, we change yearly the contract of gas and electricity, if there is a better alternative on the market. This would be some countermeasures for inflation, that we apply to us, and somehow, we keep the same pace as the inflation is increasing.

And now to the interesting part, the value gains during the inflation. We try to diversify as much as it gets our investments. One investment that we have is to build a real estate portfolio. With this, inflation can be leveraged and a lot of capital can be gained, with a low investment. We bought in the past years, some units to a 1% bank rate. The units, have been profitable from the first year, as we have lent money from the bank to buy them, with a low payment down, just to cover the notary, and taxes. How do we make money, by borrowing? Well, first, we borrowed at a rate under the inflation. So let's say a basic 5% inflation, at 0% would be a giveback value of roughly 95% back. With the 1% we are at 96% payment. During inflation, real estate tends to increase in value. And we rent the units, which pay the mortgage. In 20 years we have a lot of units that are fully paid, where we paid less than what we borrowed, and where we have an increase in value. This is one good way to make very good money during the inflation.

It sounds easy, but it is not, as first, you need to find the deals, second, a bank that gives you low interest. Third, the tenants are mostly problematic. But if you manage all of it, and you need to, it is a very profitable business.

How about you? Do you feel the inflation?