Methods to restrict inflation’s impression in your investments, price range

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American consumers are already suffering from prices on grocery store shelves and at the pump.

Now, October data shows that last month inflation was even higher than some experts had forecast. The consumer price index, which measures the average price development over time, rose by 6.2% year-on-year, its highest level since 1990.

Much of this gain was due to rising food and energy prices. Still, core inflation, which excludes these drivers, skyrocketed 4.6% in its fastest spike since 1991.

Higher prices and supply chain issues that make specific items difficult to find may not be easy to fix right away.

“I have tremendous faith in American ingenuity and business to ultimately solve these problems, so I think this will wear off,” said Carl Zuckerberg, principal and chief investment strategist at RZH Advisors, an independent asset management firm that operates on Number 46 was CNBC’s List of Financial Advisor 100 for 2021.

“But it has the potential to be pretty painful for a while, especially since a number of the issues revolve around manufacturing overseas,” he said.

Experts say there are steps people can take to stay one step ahead of rising costs.

Stay invested in stocks

The most important way to offset inflation is by owning stocks, according to Mark Hebner, president and founder of Index Fund Advisors, a fee-only advisory and asset management firm that ranks 72nd on this year’s FA 100 list.

The reason for this is because stocks have a strong track record. For more than 90 years, stocks have delivered returns above inflation, he said.

The key to success is to design an all-weather portfolio for all market conditions and then rebalance it if necessary, Hebner said. In other words, scary headlines about rising costs and supply chain problems shouldn’t throw you off course and lead you into reactionary deals.

Additionally, it is important to remember that these prospects are not all doom and darkness.

Current estimates, including by the Federal Reserve of St. Louis, point to an inflation rate of 3% for the next five years. That’s roughly the rate of inflation we’ve seen over the past 94 years, he said.

“I think that fears of inflation are often exaggerated,” said Hebner.

Adjust your income expectations

Ideally, your income should grow at the same pace as inflation. If it doesn’t, you may need to cut back on your spending.

This is especially true for retirees who expect to be able to live on a certain part of their portfolio. An annual payout strategy of around 6% should allow people to keep pace with inflation based on the expected increases in the value of their portfolios, Hebner said.

However, if retirees are struggling to pay for certain items, they should cut back on their expenses, he said. Variable expenses, like entertainment, would be a good place to start.

Those on social security benefits will see their monthly checks increase by 5.9% over the next year as the annual cost of living adjustment will be the highest in four decades.

Meanwhile, workers who are still employed should hope for at least a 3% annual pay increase to keep up with rising costs.

Negotiate your debts

A home for sale will be on display in Houston, Texas on August 12, 2021.

Brandon Bell | Getty Images

A great way to combat soaring prices is to manage your costs, Zuckerberg said.

To this end, Zuckerberg’s team at RZH Advisors asked customers to refinance their mortgages at 15- and 30-year fixed interest rates.

“Having a fixed-rate mortgage at a fixed rate means that the cost in your life, which is usually one of the larger costs on a person’s budget, doesn’t rise with inflation,” Zuckerberg said.

In addition, it is important to refinance or pay off other debts that you may have.

When buying new items, look out for offers that offer 0% interest on items such as mattresses or exercise bikes for longer periods such as 39 months.

“If you think inflation is going to be high, it means every day is worth a dollar less,” Zuckerberg said.

“If you can pay in discounted future dollars, that’s a home run in an inflationary environment,” he said.

Reconsider your gas usage

Bundle your purchases

As the prices of cars and homes rise, you can potentially get significant discounts on these large purchases by bundling them up.

Zuckerberg had clients doing home renovations with a neighbor at the same time using the same contractor. The contractor was able to carry out the work on both properties and only had to bring in equipment once. Those savings were passed on to neighbors in the form of a 15-20% discount on a six-figure job.

The same concept works when buying a car. If you go to a dealership with a friend and buy every single car, you may be able to negotiate a bigger discount than if you were traveling alone, he said.

“We recommended this to our customers and it works on all levels,” said Zuckerberg. “It’s a win-win situation.”

Looking ahead to 2022, CNBC’s Financial Advisor Summit will bring together forward-thinking advisors like the FA 100 firms to hear from industry heavyweights about the state of markets and share innovative ways to meet their clients’ needs. Register to participate on December 8th.

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