Inflation seems to be the word of the day. It’s been so long since we’ve experienced any significant inflation, before the lifetime of many of our members as a matter of fact, that it seemed like a good idea if we said a few words about the subject here.

What is inflation? Simply put, inflation is when a dollar doesn’t have the same buying power as it used to. Consequently, prices start to rise as merchants seek to get the same effective return as they had before the inflation began. Is it good or bad? Well, that kind of depends – salaries and interest rates generally rise when the costs of goods do – but that’s matched by the increased cost of living. And of course, these things only roughly rise together – so there are often uncomfortable mismatches. Overall, a little inflation is not a bad thing – besides me complaining to my kids about how much cheaper things were when I was a child, a moderate amount of inflation usually goes unnoticed.

But I think it’s safe to say we have all noticed recent price increases, at the grocery store and the gas pump in particular. Economists right now are debating whether this inflation is “transitory” or “structural”. Is it just caused because of supply problems as we come out of the pandemic, or does it have more to do with government spending? If it’s transitory, we can expect a few months of prices rising before things even out. If it’s structural, we may be in for a longer slog that will require some strategies our households can use to ride it out.

My guess (and I’m freely admitting it’s a guess) is that this current bout of inflation is somewhere in the middle of what the competing analysts say. Supply problems are massive, as anyone who has tried to buy lumber recently can tell you – and those will even out in the next six months or so. But there are also some signs that this may be a but more long lasting, albeit not as dramatic as it has been recently.

So, what are some strategies you can use to hedge against inflation? Well, the most important thing I can recommend is if you haven’t refinanced your home yet, please do so as soon as possible. Interest rates will almost certainly rise and the super low mortgage rates we have enjoyed for the past 10+ years will be going away for a while. If you have savings, try to lock in at good short to mid-term certificate rates. You probably don’t want to buy 5-year CDs right now – you could be giving up money later on if the rates continue to rise — but look for strong rates in the 1-3 year terms. It’s a decent time to buy a car – again you’re going to get a great rate. The problem is that the inventory is tight, but even when the supply loosens up, I wouldn’t imagine prices coming down – so if you can find the right vehicle, now may be a good time to buy, even if you feel like you are overpaying compared to a year ago.

Please feel free to contact either myself or one of our Wealthcare Specialists if you have questions about things you can do to maximize your dollar power in this environment. And we can hope that even if we have 1970’s style inflation we don’t have to have 1970’s styles in clothing coming our way as well!