With the Fed's announcement of QE2 (more money creation out of thin air), it is becoming more likely that we will see high price inflation in the somewhat near future. While a lot will depend on action by the banks, it wouldn't surprise me to see the CPI rising at 15% or more in the next year or two. I know that CPI isn't accurate when it comes to reading inflation (monetary or price), but it is still useful to look at it to see trends.
The most important thing you can do is to have a portion of your investments, say 25% or maybe a little more in this environment, in assets that will do especially well in inflation. I don't like TIPS (bonds indexed to the CPI) because they are dependent on the government's reading of inflation and they also are not a good hedge because they don't go up in real terms.
Investments appropriate to hedge against inflation are precious metals and other commodities. Gold and silver are the best metals, but I favor gold because it is less volatile. Oil and food are important because we use these things in our daily lives. Although traditional stocks may go up during inflationary times, they are not as reliable and will probably go down in real terms (inflation adjusted). There are a wide variety of ETFs and mutual funds to invest in to get exposure to commodities.
While I will expand on these at a later time, there is something else you can do as a minor hedge against price inflation and you can't really lose money on it. It is something I've talked about before, but it is worth repeating. If prices are going to be higher a year from now, why not buy things now instead of a year from now when prices are higher? If you have storage space where you live, there are a lot of things that you can buy now and store for later. I don't recommend buying a house or car (unless you really need one and can afford one), but there are always things you know you will need. Here is a sample list of things that you can buy now and store for later. I'm sure you can add many things to this list:
Use the first in, first out method. These are just a few things in a long list. You will not become rich using this method, but you might save a few bucks down the road. What do you think the chances are of these things being less expensive a year from now? If you have the space, why not start buying in bulk? If you see a sale at the store, buy some extra. If you buy $500 worth of stuff today and prices go up by 20%, then you will save $100. If you wait for sales, you will save even more.
Again, this method won't make you rich, but it is something easy you can do if you have the storage space. If you have any extra money, it is better to buy cheaper goods now than to have it in a savings account earning less than one percent interest.