The BLS (Bureau of Labor Statistics) May 12th release highlighted some eyebrow-raising price increases over the past 12-months:
ALL ITEMS + 4%
Here’s a picture of inflation for the past 25 years. It’s basically averaged about 2%.
Energy commodities…think gasoline, jet fuel, diesel + 48%
Energy services…think home utilities + 5%
Used motor vehicles + 21%
Food away from home…those restaurants you can’t wait to get back to + 4%
Energy services…think home utilities + 5%
Used motor vehicles + 21%
Food away from home…those restaurants you can’t wait to get back to + 4%
ALL ITEMS + 4%
Here’s a picture of inflation for the past 25 years. It’s basically averaged about 2%.
But wait! None of that is likely to mean much to you because we all have a personal narrative about what it means. Except for a few trips east, I’m not a big consumer of jet fuel. I’m not buying a used car. And I don’t have dependent-related expenses like for childcare or tuition. Every household has different things they’re sensitive to. And every household has their own inflation rate, depending on what they’re up to. Your rate is probably nowhere close to the government published rate.
So, what do we do with this? We would all prefer that prices remain stable. But prices are far from stable. When prices rise, we have options and choices. We can…
· Find more income. Improve your skills. Maybe change jobs or career path.
· Use savings and investments. This is what you worked hard, saved, and invested for.
· Find less costly substitutes. The retail environment is highly competitive and you’re a smart shopper.
· Just do without. A lot of what we think we ‘need’ is really just a ‘want.’ Get real with yourself.
Debates rage in the financial world about whether inflation will persist, or maybe it’s just temporary. (Click on Dr. Ed's blog over on the right hand sidebar for a detailed discussion or go here.) Even the Fed doesn’t know. They recently said they’ll be guided by data rather than expectations. This should be interesting.
Here’s what not to do:
· Hope for better interest rates. The Fed has told us they’ll keep rates low until 2022, at least.
· Expect continued great stock market returns. Don’t count on it. “If wishes were horses, beggars would ride.” (Want a deeper explanation? Go here.)
· Respond to some breathless urgent warning to “protect yourself from the coming financial disaster!” Ignore all that. You’ll be sold something you’ll likely regret.
As stated earlier, all of this means different things to each person and household. Your age, life situation, and aspirations are unique to you. When you’re ready for an honest conversation about that, here’s our contact info:
So, what do we do with this? We would all prefer that prices remain stable. But prices are far from stable. When prices rise, we have options and choices. We can…
· Find more income. Improve your skills. Maybe change jobs or career path.
· Use savings and investments. This is what you worked hard, saved, and invested for.
· Find less costly substitutes. The retail environment is highly competitive and you’re a smart shopper.
· Just do without. A lot of what we think we ‘need’ is really just a ‘want.’ Get real with yourself.
Debates rage in the financial world about whether inflation will persist, or maybe it’s just temporary. (Click on Dr. Ed's blog over on the right hand sidebar for a detailed discussion or go here.) Even the Fed doesn’t know. They recently said they’ll be guided by data rather than expectations. This should be interesting.
Here’s what not to do:
· Hope for better interest rates. The Fed has told us they’ll keep rates low until 2022, at least.
· Expect continued great stock market returns. Don’t count on it. “If wishes were horses, beggars would ride.” (Want a deeper explanation? Go here.)
· Respond to some breathless urgent warning to “protect yourself from the coming financial disaster!” Ignore all that. You’ll be sold something you’ll likely regret.
As stated earlier, all of this means different things to each person and household. Your age, life situation, and aspirations are unique to you. When you’re ready for an honest conversation about that, here’s our contact info:
Jim Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
