Inflation & How It Affects Your Family

Inflation & How It Affects Your Family

Costs of Inflation- gas prices rising

Inflation is real, it is rising, and it reduces your spending power and quality of life AND, there is not any suggestion that it will be dropping anytime soon. The latest government published inflation rate is 8.6% which is bad enough, but real inflation is several times higher ranging from 15-25% and even up to 100%+ based on product type. Fuel is an obvious one, but so is every other regular purchase like food, energy, cars, rent, etc. What it really means is your hard earned dollar only buys you 80% of what it used to, or put another way, you’ll need to work an extra day a week to have the same purchasing power.

How It Affects Your Family

In most cases, you don’t have the opportunity to earn more, so you will instead have to cut. You’ll need to cancel subscriptions, drive less, eat out less, stay off Amazon and generally trim back. Most things won’t hurt, but this will reduce what your family can do for entertainment, recreation, and whim.

This is all uncomfortable and a real bummer, but what if it gets worse? Generally, the U.S. has been pretty stable and even when the economy takes a hit, the pain is limited. Many other countries have faced far worse issues with inflation, where every day their money buys less and less. In several instances, the value of the currency was less than the paper it was printed on. It would take wheel barrels of cash to pay for a few groceries.

Jobs & Supply chain

Inflation hits companies too and we will start seeing more and more businesses laying off and cutting spending. Eventually that shows up with reduced output and more shortages and possibly more inflation. It also means that you job may not be as stable as you would hope. You must consider what life looks like if you are laid off. How do you pay bills, keep food on the table and manage the essentials of life.

Shrinking Savings

Not only does your paycheck not stretch as far, but your savings and investments are also worth less. Your retirement plans will seriously be impacted because most of these are not inflation adjusted. Social Security is inflation adjusted, but it is based on the official government

What To Do?

If you have more than $10,000 to $20,000 of cash savings, consider going ahead and buying any items you’ll need in the next 6 months or so. food, pantry items, car service items (tires, oil, repairs, etc), clothing, tools, etc. Once that is squared away, consider buying other hard assets that will be useful or valuable like land, gold, silver, ammo, or anything else that has long term value or functionality. Otherwise, those dollars will shrink in real value. You might even reevaluate your 401K, stock holdings, and other financial market based investments as those will continue to drop. If you need to access that money in the next few years, it’s probably a good idea to take it out now, even if a loss from our recent highs