(FinancialHealth.net) – In a recent report, we told you about the Fed basically creating money out of thin air. We explained how their decision could negatively impact the economy by causing prices to rise, resulting in inflation. That may have led some of you to wonder what happens when the country moves in the other direction. How should Americans prepare for deflation?
When the economy enters a period of deflation, the price of goods drops (or deflates). Many issues can cause this to happen, including a decrease in demand, an increase in productivity or shortage of money circulating. If it gets bad enough, it can lead to increased unemployment and fewer people investing.
Here’s a short video to help explain:
There are ways to protect yourself before the country enters a period of deflation.
- Make sure you have a healthy savings account. You should have enough to pay 3 to 6 months of expenses.
- Be mindful of what you invest in. For example, don’t run out and buy a house.
- Pay your debt.
- Don’t start impulse shopping.
- Find a second income.
Basically, prepare for deflation the same way you would for any other economic downturn. You want to ensure you’re not spending outrageously, so keep an eye on what you invest in and make sure you have enough money for emergencies. If you’re mindful of these points, you can feel more secure with whatever comes your way.
~Here’s to Your Financial Health!
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