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“You can get past the dead end. You can break through the ceiling. I did and so have countless others.”

Finance Tip Friday #79: What Persistent Inflation Will Mean for You

Tired yet of the cost of everything going up? Me too. Since the COVID pandemic, not only has my grocery bill gone up but I’ve also seen some of the houses in my community go up by as much as 50 percent. Not a good time to be a new homeowner.

Unfortunately, inflation doesn’t really seem to be going away. With every new report from the Bureau of Labor and Statistics (BLS), the U.S. seems to be stuck around the 6 percent mark.

Just like with weight loss, it’s easy when you’re on the heavy side to lose those first couple of pounds. However, as you get closer to your target, those last few pounds become exponentially harder to eliminate. 

The same seems to be true for inflation. I’ve heard many economists refer to it as “persistent”. For my fellow nurse practitioners and the public at large, this means three things. 

Everything Will Stay Expensive

Going back a year ago, everyone assumed that when prices went up, they’d eventually go back down to pre-pandemic levels. However, that doesn’t seem to be happening (at least not any time soon).

We have to face the fact that this is now the way things are. The price of everything doesn’t seem to be changing, and therefore we need to adjust our mindset and spending habits to compensate. 

Borrowing Money Will Cost More

The Federal Reserve has had its hands full trying to combat inflation. For now, their only choice is to keep raising interest rates. While historically this has worked to eventually tame inflation, it does have the disadvantage of making everything in the banking industry more expensive: mortgages, credit cards, loans, etc.

The good news is that interest rates don’t stay high forever. They’re cyclical and will likely be reduced when inflation is under control and the Fed feels they can pivot. 

Better Interest Opportunities for Cash

Raising interest rates isn’t always necessarily all bad for consumers. While the cost of borrowing money goes up, so does the price banks will pay you for your money. This means better opportunities for using cash products like high-interest savings accounts, CDs, bonds, etc.

This is great news, especially for investors who are more conservative. Instead of putting your money into stocks that might lose value, now you can easily capture 4 to 5 percent with no downside. 

My advice to all investors: Take full advantage of these rates for as long as you can. Whether that means parking your money for a rainy day or sitting it on the sidelines until better opportunities come along, make the most of this opportunity to get a guaranteed rate of return.

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