Take some action to fight inflation
The covid shutdown gave companies a lot of reasons to raise prices. Remember those shortages everywhere? Remember when toilet paper was more valuable than gold? Well, not really, but you get the point. The shutdown was the beginning of the steady rise in inflation we are still seeing today. As anyone who does the grocery shopping knows, a lot of the price jumps we saw never came back down.
At the time of this writing, beef prices are currently at all-time highs. Health insurance costs seem to go up by 10% plus per year. Coffee prices are at all-time highs. Auto insurance….no claims in my house for twenty plus years….come on, this is crazy. My electricity bill doubled from July to August. I know it was hot and we used a lot of A/C, but doubled?
On the government level, the Federal Reserve Board will usually raise interest rates to help control inflation. Anyone who follows the news knows that there is a lot of political pressure for the traditionally independent Federal Reserve Board to lower interest rates when the next meeting occurs. While lowering rates may have some positive effects in other parts of the economy, it would not be good news for inflation itself. Lowering interest rates to zero, as some are proposing, could be a disaster for inflation rates in the USA. The Fed is in a difficult position and it will be interesting to see what their next move will be.
What can we do to try and stay out in front of inflation? For starters, invest in the stocks of the companies that are keeping things inflated. I worked for a corporation for seven years before becoming an advisor. Keeping prices high was something that benefited the company, which then benefited the employees, and it definitely helped the stock price. Investing in the stock of these companies is one way to play the game. As the old saying goes, “if you can’t beat them, join them.”
Another good and simple idea is to make sure your cash is working for you. Lots of folks are still hanging with their bank from down the street who is paying a lousy 1% on their savings account. A little shopping for a high yield savings account should easily yield you at least 3.5% these days. If your current bank is not willing to pay you, then someone else will. If inflation is sitting around 2.9% and your cash is earning less than that, your money is losing purchasing power each and every day.
For many years, we had little to no inflation. Now that it has been hanging around for the last five years or so, it is well past time to make sure you have your plan together to help address it. As long as the bull market keeps running, most of these prices are not coming back down. This is the new normal, until it isn’t. Make sure you take some simple steps to help stay out in front of the inflation and keep your financial plan moving in the right direction.
