The Best Hedge Against Inflation is Living Debt Free

22 Mar The Best Hedge Against Inflation is Living Debt Free


Rising food & gas costs due to inflation

Easier to manage cost increases when you don’t have debt

I can’t turn on the tv without an ad that talks about how massive inflation is coming and how I need to buy gold (at record high prices) to hold off inflation. When I turn the channel, there’s someone telling me how the government started printing more money in the middle of the recession and how that will lead to record inflation rates. When I drive down the street I start to see the impact of these things at the gas pump. My wife is telling me our grocery budget needs to be adjusted because food prices are rising.

There seems to be a general panic happening across the country. Everyone is worried about rising costs and concerned about their ability to pay their bills. Not so much for me. Yes, I believe inflation is coming. Yes, I believe it’s going to be painful. But I don’t believe (maybe someone can convince me otherwise) that buying gold is the solution. In fact, while I don’t like seeing my daily expenses like food and gas rising, I’m not panicking about it like a lot of other people.

Don’t panic; Get out of debt

The reason I’m relatively comfortable is that I live without debt. I don’t have credit card bills. I don’t have car payments. I don’t have a mortgage. And because I don’t have all of these, I have wiggle room in my budget. I can live on half of what most people do because I don’t have all of those mandatory spending categories.

You see, several years ago my wife and I decided that we didn’t want to ever be in a position where we were crippled by a reduction in income. We worked hard to get rid of our debt so we could have more options. Once we had no debt payments we experienced a freedom we had never felt before.

It’s amazing. When gas prices went up, we adjusted the gas budget up and reduced another discretionary spending category. It wasn’t fun. We didn’t like cutting back in another area. We realized we may need to increase our income if we want to maintain the same standard of living. But we still remained calm knowing we had options.

Your costs will go up

Inflation is coming. Job losses and reduced income are coming. Medical expenses are coming. Increased insurance premiums are coming. It’s only a matter of time before one or more of these situations affects your household. Don’t wait until they happen to realize you need to do something. Act now to get rid of your debt, get ahead of the game, and establish your own hedge against inflation.

2 Comments
  • Moana
    Posted at 20:31h, 21 December

    Hey this article is wrong, low-interest debt is a major hedge against inflation and mortgages are often used to hedge against long-term inflation for personal investors. Used correctly, debt is an important financial tool, and the title of this article is just plain wrong. Like, factually incorrect. Please fix your facts. Debt is a hedge against inflation, that is just a mathematical fact. I hope nobody got paid to write this article, my goodness.

    • Matt Wegner
      Posted at 20:50h, 21 December

      Moana, how can borrowing at any interest rate be a better hedge than having more cash flow to invest? Even low interest debt is still paying out more money. I know the financial world generally accepts that mathematically debt is a hedge, but personal finance isn’t about the math. If it were, everyone would be rich. Personal finance is about behaviors. Winning with money starts by stopping the behaviors that keep us in debt, like borrowing more money…