Inflation

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Inflation

All right, let’s talk about inflation and what that might mean to you. So again, inflation you’re going to be looking at a scenario where there’s a high demand for goods with a low supply. So there’s also going to be too much money chasing say, too few of goods or services. So you’re going to have an inflation or that price increase. So ultimately, the question is who gets hurts the most by inflation? It’s typically going to be those people that are living paycheck to paycheck and ultimately spending a bulk of their money. The biggest areas typically hurt are going to be say, energy is usually one of the leaders out there, food, housing are other areas that obviously those items that you need for daily living. But again, it’s those folks that are ultimately not setting money aside into savings and trying to get by on what they have that are going to feel it the worst. So if people don’t have that additional say, discretionary income, then they aren’t going to be able to spend quite as freely. They’re not going to be able to save money. And so that’s going to ultimately going to drive up that inflationary factor. And eventually, when that happens and people aren’t spending as much money or spending it quite as freely, then you’re going to start to see that hurt some of the corporations. And they want to sell you those goods, but if you’re not out there spending that money, then that’s going to have an impact. Or if you think of say, some of those service industries such as like the restaurant or travel industry. We saw that back in March of 2020. Everything sort of shut down. So you saw those restaurants and travel industry essentially go to nothing and then now you’re experiencing that drive of prices back up. With that being said, some inflation is going to be good. Maybe you invested in real estate several years ago and you’ve had the benefit of seeing those rising real estate costs or perhaps you bought a vehicle and you saw that price go up. And now the challenge might be if you’re looking to purchase a vehicle. But that’s where you start to see some of those values increase. The Federal Reserve ultimately wants to keep unemployment at a low as well as inflation in check. Usually their target for inflation is approximately 2%. In higher inflationary times, you may have higher manufacturing costs or higher wages, higher labor costs happening. So ultimately again, going to drive up those prices. So you want to be aware though of what you call your real return on your money such as your cash. What are you doing with that to try and get some earnings? If you’re not making the money sitting in a bank account, are there better opportunities for you to try and keep up with inflation so that you’re not effectively losing money by not earning anything on that. So again, all important areas that you want to consider. And we’d love the opportunity to sit down with you and discuss this in greater detail.