Getty Images; Taryn Williams; BI
- To fight inflation, I'm earning more money with side hustles and diversifying my investments.
- Even though I'm making more money now, I'm not spending more money.
- This article is part of "My Financial Life," a series helping people live and spend better.
As someone who grew up without financial stability, I've been motivated to create a safety net for myself. I have a deep understanding of how money problems can affect one's quality of life. Breaking the cycle of poverty and growing my nest egg have always been goals of mine.
I've found ways to stay ahead of inflation and build my wealth so that my net worth can grow and I don't have to worry when I have a financial setback. I've been able to leave toxic work environments, make decisions not based entirely on money, and even take a year off from work to travel through South America.
Most importantly, however, my approach to money has allowed me to feel safe and secure for the first time in my life.
1. I take on a variety of side hustles to grow my income
One way I've managed to stay ahead of inflation is by taking on side hustles. Diversifying my income has allowed me to continuously increase the amount I earn, which has provided extra money to save and invest each month.
I target this money toward specific goals — like paying off student loans or saving up an emergency fund — and I always have one or two side hustles I can focus on if something happens to my primary job.
2. I diversify my investments to beat inflation
When I started my financial journey, I kept my money in a high-yield savings account until I had enough for an emergency fund. These accounts typically accrue far more interest than traditional savings accounts, helping savings keep pace with inflation.
In addition to keeping money I'll need in the next year or two in an HYSA, I've diversified my assets to allow my money to work for me. The majority of my wealth is invested in index funds and exchange-traded funds. Because these funds tend to provide solid returns, this money has grown exponentially and provided the largest growth in my nest egg.
I've also invested in I bonds. Though their interest rates can vary and are sometimes below the rate of inflation, they can offer incredible value. In 2022, for example, the interest rate was 9.62%, which was a great time to buy $10,000 worth — the maximum amount allowed a year.
3. I don't spend more money even though I make more money
Finally, I've maintained frugal habits even as my salary and net worth have grown. While I went from making about $10,000 the first year I was working to about $100,000 during my last school year as an educator, I haven't experienced significant lifestyle inflation.
I've continued using credit-card rewards, couponing, and shopping sales, and I've avoided spending too much on a house or getting a car loan I don't need. It's easier to stay ahead of inflation when I'm not buying more than I need and when I'm using resources like coupons to my advantage.
I'm planning for early retirement and living my best life now
All these strategies have allowed me to continue to grow my wealth beyond what I thought was possible when I was a child. This has provided me with a safety net I can rely on when things go awry.
When I found myself in a toxic work environment a few years ago, for example, I was able to quit without knowing for sure what would come next. I had the flexibility to make the choice that was right for me without having to worry about how I'd make it work financially — the ultimate luxury, and one I had been working toward my entire life.
Setting my finances up in a way that has allowed me to have a sense of financial freedom has been liberating. I have enough money now that I can take time off from work and live on my savings and investments for a while if necessary, and I'm on track to retire early — hopefully by my mid-50s.
I've seen many people who were forced into early retirement or who stayed in their jobs longer than they wanted to increase their pension amount. These situations further proved to me how important it is to have a nest egg that allows me to make life choices without money being the primary factor.