Inflation: what expenses should be advanced to cover rising prices

The devaluation of the official currency that occurred on August 14 led prices at an unprecedented level and the eighth month of the year was difficult for almost all Argentines. And adapting to price dynamics forces us to think about how to make the pesos perform better and that includes the decision to make urgent payments, get out of debt as quickly as possible and changeas soon as possible, that appliance or gadget before its price increases. In a nutshell, juggle with the silver

This situation, however, could escalate, since the market takes for granted a devaluation of the 30% in October and, “perhaps, a more violent one in November/December of 40 or 50%,” said a source from the banking sector to Ambit. This would bring the official exchange rate to $450 after the elections and, “closer to the second round”, to $600. “The year should end, like this, with an official exchange rate of between $680 and $750,” added the source, who asked No be identified.

Of course, the Government has not stood by and is trying to dominate the shock wave of the devaluation and, of course, of the economy that is coming, injecting liquidity in people’s pockets and trusting that these measures will be directed towards consumption. Therefore, analyzing the panorama, Ambit He consulted financial experts to know how to manage himself financially in this situation.

Consumption: the experts’ recommendation

According to the analysts consulted by this medium, the recommendations range from playing with price dynamics, “to have it in our favor“, until postponing the payment of debts that do not adjust for inflation or that they are dollarized. In that aspect, the ideal investment advisor in the market, Gaston Lentiniindicates that it is important to take into account how “we manage our payments” to maximize our financial benefits and give some key guidelines in this regard:

1. Use the credit card: As far as possible, we should use credit cards to make our purchases. This is preferable even to cash, unless we get a significant discount for paying in “cash“.
2. Avoid debit card: It is advisable to keep the debit card and not use it regularly. The reason behind this is that, if we use credit instead, we are effectively obtaining an implicit discount because we anticipate possible price increases due to inflation.
3. Take advantage of interest-free installments: If we have to make important purchases that offer the option of paying in interest-free installments, we should seriously consider it. Inflation will gradually reduce the weight of those fees on our income over time.
4. Calculate the total financial cost: For those who want to delve deeper into the financial mathematics, it is useful to calculate the total financial cost of the installments. Sometimes, even paying interest, this option can be beneficial.
5. Compare with inflation: The key is to make sure the total financial cost that they charge us in the installments is less than 100%, which is a round figure that represents annual inflation. If this is true, inflation works in our favor.

The strategy of maximizing profits using inflation in favor, Lentini maintains, can be applied to any type of expense; from school fees or faculty, up to the expenses of the consortium. “If the consortium charges a rate lower than inflation, It is advantageous to delay paying expenses“, warns the advisor, and, instead, proposes, “put that money to work in investment options like a Common Fund (FCI), can generate an annual return of 97% to 98%.”

In this daily game, typical of an economy in crisis, Lentini assures that the debts we owe “pay immediately are those that grow faster than inflation or are denominated in dollars“, as they become more difficult to cope with over time.

For example, in the case of a UVA credit, we must ensure that our income or investments exceed the evolution of UVA (approximately equal to inflation), or else it will become increasingly difficult to pay. Likewise, debts in Dollars become more challenging as the peso depreciates.

Quotas: always take advantage of the opportunity

Elena Alonsoa graduate in Economics, maintains in statements to Ambit that, first of all, when you have the opportunity to buy something at a price significantly lower than the market price, especially if the counterparty need dollarsIt is an excellent opportunity for invest and take advantage.

Secondly, in the case of Expenses that can be financed in fixed installmentslike purchasing a car (in fact, more than 30% of vehicle buyers do this), it is wise to pay the smallest possible amount in cash and make the most of available financing. This allows capital to be used more effectively and optimize our resources.

In addition, Alonso recommends financing important expenses instead of paying cashespecially in a context where “cash doesn’t work“Putting that money to work in investments is more beneficial,” says the analyst in line with what her colleague recommended, Lentini.

Reap the benefits of relief measures

As to creditsadds Alonso, if attractive rates are offered, such as a 60% for teachers, it is a valuable opportunity. “Loans can be used for both essential expenses and pay debts of Credit cardswhich helps clean up our finances and free up capital for other expenses, such as groceries.”

Both analysts agree that all expenses that have interest below inflation we have to postpone them. In that sense, Omar Luccaspecialist in financial education, in tune with Alonso and Lentinioffers seven tips for “optimize personal expenses” in this situation and best overcome the liquidity crisis in our pockets:

1- In relation to the consumer goodseverything that can be bought with Now 12 before the elections “It is a good strategy to take care of cash.”

2- The credit card is an expense not deferrable given today’s interest rates for get into debt with that means (includes financing via advances). In other words, it is not advisable to pay the minimum and delay paying the total.

3- Pay for services with the money available and do not delay them.

4- Tax moratoriums to pay in subsidized installments of both national and provincial taxes.

5- Coverage of basic needs cannot be extended, but the above can.

6- Avoid getting into debt at current ratesat least until 2024.

7- As much as possible pay fixed monthly expenses (not variable) with financial income and set up a contingency fund in dollars to be prepared in case the outlook is even worse than the current one.

In summary, prudent management of personal finance and strategic decision making are essential to cope with the current economic situation of the country that affects us all.