Robert Wenzel, who blogs at EconomicPolicyJournal.com, has a piece today on price inflation.  He goes through seven things, identified by AOL, that will cost more in 2011.  The seven things listed by AOL as likely to rise are food, gas, medical care, clothing, college, raising kids, and bank fees.

Medical care and education may go up without high price inflation, just because government is so highly entrenched in these things.  Bank fees are too small to worry about and raising kids is too general.  For the other three things, food, gas and clothing, I agree.  There is no guarantee these things will go up in price in 2011, but it is likely, and if it doesn’t happen this year, it will most likely happen shortly after.

If your net worth is less than 6 figures, I think the best way to hedge against inflation is to buy things now that will likely go up in price later.  You can’t really store a lot of gasoline, or at least you shouldn’t.  It is hard to hedge against rising gas prices unless you play options/ futures.  It is even hard to find stocks and ETFs that correlate to the price of gas.

For clothing, you should consider buying clothes now that you might need in the future.  This is a tough one though because there might be a tendency to buy what you want instead of what you will need.  If you are disciplined, go ahead and buy some new clothes now and put them away for when your current clothes are worn out.  Just make sure not to gain or lose too much weight if you do this.

For food, it is hard to buy a lot of things in advance.  You can’t buy milk, but you can buy canned foods and some other items that last for a while.  Just make sure you follow the FIFO method – first in first out.

There are other things you can buy in advance.  You can buy paper towels, toilet paper, soap, razor blades, kleenex, shaving cream, toothpaste, makeup, shampoo, laundry detergent, and a whole host of other things.  Again, you should use the FIFO method so that things don’t get too old.  If you don’t have a lot of storage space, look in closets to see if you can put any shelving up high for more storage.  You should look for sales when you go to stores like Target or Walmart.  I hope you aren’t buying these things at the grocery store unless they are on sale or you are rich.  You can usually find them elsewhere cheaper.    When you see a sale, load up on the item (within reason).  It is an investment that you can’t really lose on.  What are the chances that prices will be lower this time next year?

If you are a millionaire, ignore this, unless you think there is going to be a total collapse in the division of labor.  If you are a millionaire, you are better off focusing on the big picture and taking care of the money  and assets that you have.  Anyone with any significant amount of wealth should be finding ways to hedge against inflation, whether it is real estate, gold, silver, or certain stocks.  I think inflation is the biggest threat to our standard of living right now.