CNNMoney.com
Companies Economy International Corrections Pre-market trading After-hours trading Winners/losers/actives Bonds Currencies Commodities Money Magazine Retirement Mutual Funds Taxes Ask the Expert Money 101 Autos Loan Center Best Places to Live Calculators Mortgage Rates Personal tech Big Tech blog Techland blog Sectors and stocks Fortune 500 techs Tech Talk 100 best places to launch Ultimate resource guide Small biz makeovers FSB 100 Fortune 500 Technology Investing Management Rankings Main Create portfolio Edit portfolio Create Alerts Edit Alerts
Gerri Willis Commentary:
Top Tips by Gerri Willis Column archive

Combating inflation

Rising prices for everyday items means your dollar is buying less. Here's how to stretch it a little further.

Subscribe to Personal Finance
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Gerri Willis, CNN

home_rich_cover.03.jpg
For more information on managing your largest investment, check out Gerri Willis' "Home Rich," now in bookstores.

NEW YORK (CNNMoney.com) -- Record-high gas prices and the surging cost of food is just the beginning. Here are some top tips on how you can take the bite out of inflation.

1. Know the terms

Put very simply, inflation is when you pay more for the things you buy. And you know you're getting hit with inflation when you drive or go shopping. Let's take a look at what prices have done over the past year. Over the past 12 months, flour is up 37%, eggs are up 35%, milk is up 23% and bread is up 16%.

Now, remember, there will always be some inflation in the economy. To find out exactly how much more you're paying, check out the Bureau of Labor Statistics at www.bls.gov and look under "Consumer Price Index." The historical long-term rate is 3.2% says economist Hugh Johnson of Illington Advisors. And don't forget, in the 70s and 80s, inflation was in the double digits.

2. Be prepared

Inflation hits just about anything you can think of: your telephone bill, your utility bill, clothes, shoes. The cost of energy, gas and electricity is going up and that's causing a domino effect. Companies are paying more to ship their goods to stores, and the cost of raw materials is also rising. And that cost is getting passed to you.

Medical costs are also hard hit by inflation. It's more expensive to produce medical equipment like MRI machines. Pharmaceutical companies are finding it more expensive to produce drugs. And don't forget about the cost of heating and lighting the hospital.

3. Insulate your nest egg

One thing you may think is insulated by inflation is your nest egg. But keep in mind, every dollar you save loses value over time. During times of inflation, you need more money to combat rising prices. Stocks tend to do better than bonds in times of inflation says Johnson.

So, even if you're already retired, it makes sense to keep some of your portfolio in stocks. If you are approaching retirement, and you want more bonds in your portfolio, you may think about investing in TIPS. These are Treasury Inflation-Protected Securities. Principal and interest payments increase when inflation increases. You can buy TIPS through a bank or broker at treasurydirect.gov or you can also buy mutual funds that invest in TIPS. To top of page

Gerri's Mailbox: Got questions about your money? We want to hear them! Send e-mails to toptips@cnn.com or click here - each week, we'll answer questions on CNN, Headline News and CNNMoney.com.
Features
6 gas-saving mythsSure you want to save gas, but there's a lot of bad advice on how to do it. Some of it makes no difference, and some of it can wind up costing you. more
Why your tax rate is going up Taxes are likely to head higher. And that could derail your retirement plan. Money Magazine's Janice Revell tells you how to protect yourself. more
Markets Last Change
Dow Jones 12,936.89 38.51 / 0.30%
Nasdaq 2,517.26 20.56 / 0.82%
S&P 500 1,415.25 6.59 / 0.47%
10-year Bond 99 26/32 Yield: 3.88%
U.S.Dollar 1 euro = $1.544 -0.004
May 15, 2008 12:38 PM ET
CompanyPrice% Change
Temple-Inland Inc 14.69 8.25%
Agilent Technologies Inc 34.97 7.51%
Peabody Energy Corp 75.62 6.48%
Allegheny Technologies Inc 79.60 6.16%
May 15 12:35pm ET †
Hot stuff and hatsEver wonder which gadget or goody the experts can't live without? Three entrepreneurs reveal theirs. more
Pain beyond the pumpHigh fuel prices are forcing this truck driver to go more slowly - which means lower pay and more time away from home.  more
Fastest-growing real estate marketsYes, even amid the housing crisis, parts of the U.S. are still expected to post price gains in the coming year. Here's where to look. more


© 2008 Cable News Network. A Time Warner Company. All Rights Reserved. Terms under which this service is provided to you. Privacy Policy
Copyright © 2008 BigCharts.com Inc. All rights reserved. Please see our Terms of Use.
MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc.
Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. All Times are ET.
Intraday data provided by ComStock, an Interactive Data Company and subject to the Terms of Use.
Historical, current end-of-day data, and splits data provided by FT Interactive Data.
Fundamental data provided by Hemscott.
SEC Filings data provided by Edgar Online Inc..
Earnings data provided by FactSet CallStreet, LLC.