In the first three months of 2022, the world experienced two devastating events.  The first is the Russian invasion of Ukraine, a devasting and troubling event beyond the scope of this article.  The second is soaring inflation, which is what I’d like focus on here.

Inflation, while not “physically” destructive like warfare, wrecks economic havoc on everything from governments and businesses to each individual person.  No one is immune from rising prices for food, transportation, housing, and other essentials.  The most vulnerable are those people whose incomes are “fixed” and do not keep up with the price increases.  A client said she remembered when she could buy a loaf of bread for less than $1.00.  She paid over $3.25 for a loaf last week!

From March 2021 to February 2022, consumer prices increased 8.5% – a rise which the U.S. has not experienced in the last 40 years.  People under the age of 65 have not really experienced how inflation hurts everyone.  There are two ways we see the damage inflation can cause.  One way is the loss of buying power.  For example, if you had kept $10,000 in a checking account this past year, your $10,000 will buy the same amount today as what cost $9,216.59 a year ago.  Another way to see the effect is realizing you will spend significantly more for the same thing.  For example, it used to cost about $27.50 to fill up my car.  The same 15 gallons of gas now costs me about $43.00.  So, I can either drive less or pay more for the same miles driven.

So inflation means, if you are on a fixed income, you are going to have to do with less.  8.5% less new clothes.  8.5% less food.  8.5% less miles travelled.  Try taking 8.5% less of any required medication.  This is why I mention inflation as the other devastating event along with a war.

Here are some ways to help you navigate potentially destructive inflation. 

Consider ways to increase your income.  Should you ask for a raise, change jobs or create a “side hustle”?  Next, pay close attention to your spending.  See if you can cut back on any expenses not truly important to you.  Finally, have a plan to grow your assets so you can afford future expenses.  Investing in the markets, for example, has historically outpaced inflation over the long term.  If you need guidance on any of these ideas, I hope you will give us a call.  By being proactive, you can soften the effects of inflation in your life.