Navigating Your Financial Foundation in an Inflation Nation

Navigating Your Financial Foundation in an Inflation Nation

three stacks of U.S. quarters stacked by height, lowest to highest, beneath a staggered arrow, indicating the rising costs of inflation.

Navigating Your Financial Foundation in an Inflation Nation

Navigating Your Financial Foundation in an Inflation Nation

Just when you’ve reached a place in life where you need the big-ticket items the most – a bigger home for your growing family, furniture for that new house, a bigger, more practical car for your growing family—Inflation 2022 hits, and those things move farther away.

You’ve probably heard that the cost of inflation is the highest it’s been in 40 years. For many of us, it’s our first inflation experience. And if that’s the case, you’ve probably lived through two recessions and dealing with crippling student loan debt already.

How did we get here?

U.S. GDP dropped by 1.4% in 2022’s first quarter. And as you might imagine the Ukraine crisis and a rocky stock market haven’t helped.

Depending on who you ask, culprits include COVID stimulus check spending, post-COVID global supply chain disruptions, the Great Resignation, and whomever a politician on any day on any news channel happens to name in the legislative blame game.

Who’s suffering the most?

An April Wells Fargo study indicates that people between ages 25 and 44 experienced the highest inflation rates, at nearly 7%. The very demographics that require those big-ticket items the most. The youngest of which is making the least amount of money.

For those of us carrying student loan debt, despite government promises to cancel it, higher interest rates will affect federal college loans as we wait for that promise to become a reality.

How long can this go on?

Some experts say it may get better as soon as the end of this year. Others say it may last until 2025. The good news is that most of them see positive signs that at least the supply chain challenges may ease soon.

Deloitte recently offered four possible scenarios in an article positing inflation’s future. They predict the following:  1. we return to normal based on economic history  2. we accept a rate of up to 4% and adjust to the new normal  3. Rates rise to between 8 and 9%, which sets off a spiral that discourages future spending or 4. supply chains improve rapidly while demand drops, driving rates down to 1% or lower.

How likely is a recession?

Technically, a recession happens when GDP falls for two consecutive quarters. Economists are saying recession risk is rising to about 50%, although their predictions vary as to how bad it may be. And no one has declared us in an actual recession yet.

The economy is as hard to determine as a pair of grandmothers’ contentious debate over whether to wake a sleeping baby or let them lie.

The Congressional Budget Office is more optimistic. They predict that GDP may grow by 3.1% and that inflation has topped out and will only go down from here.

Given the ongoing debate, it’s best to prepare for the worst and hope for the best.

What Can I Do to Prepare?

The most important thing you can do is to create a budget and learn how to stick to it if you haven’t already. And make sure your budget reflects your actual spending.

Before you make any purchase, carefully consider whether what you plan to buy is a need or a want. If you’re used to buying on a whim, inflation is a great opportunity to acquire a long-term financial mindset by delaying your purchase if you can.

And refrain from listening to the tempting calls of the credit cards in your wallet. Remember, the fed raised interest rates. And, given we are living in uncertain times, you probably shouldn’t rack up credit card debt if you can help it. However, if you’re already carrying credit card debt, consider a balance transfer to a credit card with a 0% APR. They’re out there.

And if you have things in the needs column, buy big. If the baby formula crisis of 2022 has taught us anything it’s that buying in bulk is a smart move.

Yeah. It’s a stressful time. But remember, your grandparents got through miles-long gas lines in the 70s, your parents survived the Great Recession of 2009. And you’ll get through this. After all, two world wars built the Greatest Generation.

Also keep in mind that economies fluctuate. This too shall pass.

In the meantime, make time for Me Time. Go to the batting cage or the gym. Zen out with meditation and yoga. Insurance data shows that stressed-out people suffer health issues they can’t pay for and leave the planet sooner than they statistically should.

Another way to prepare for the worst is to have a solid life insurance policy with a locked-in rate. Get term life insurance policy quotes today.

Nicholas Trawinski

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