Cisco & Co CPA

  • HOME
  • SERVICES
    • ACCOUNTING
    • PERSONAL FINANCIAL PLANNING
    • BUSINESS FINANCIAL PLANNING
    • CHIROPRACTIC ACCOUNTING
  • WHY US
    • STAFF
  • FINANCIAL RESOURCES
    • DOWNLOADABLE FORMS
  • CONTACT US
CONTACT US

It’s BACK! Inflation is Among Us

$100 bills on a wooden background
Wednesday, 29 September 2021 / Published in Personal

It’s BACK! Inflation is Among Us

Recent high inflation rates are driving up the price for almost everything and eroding the value of your money. With varying opinions on the potential duration of the current inflation surge, it’s important to understand the causes and how you can protect your money.

Possible causes of this inflation

While the root causes of inflation are not always easy to identify, the premise is simple – prices are going up for goods and services. This is often because demand is higher than supply. Here are some of the basic drivers of today’s inflation.

The demand-pull situation

Demand for a product increases but the supply remains the same. Think of a vendor selling ponchos at a state fair. If it rains, demand is going to spike and fair-goers are willing to pay up to keep dry. This situation is rampant during the pandemic, as we all see runs on things like toilet paper and hand sanitizer. And now we are seeing pent-up demand being released, as some of the pandemic restrictions are eased. An example of this is popular vacation locations being all booked in advance.

The cost-push situation

Demand stays constant but supply is reduced. An example of this is a lower-yield crop season when a major drought hits a region. Consumers still want their dinner salads, but lettuce is sparse. So retailers charge more to cover their increased costs. Or when paper mills switched production to handle higher toilet paper demand, pulp used for paper and packaging had supply reductions creating a shortage which increased their prices.

Factoring in the money supply

The more money there is available to spend (high money supply), the more the demand on all goods and services goes up. This is being manifested in wage increases as employers are having a hard time filling jobs and is also the result of many of the government spending programs during the pandemic.

Ideas to protect yourself during high inflation

Alternative savings that is NOT cash

The value of your money sitting in your wallet or in low interest bank accounts is shrinking before your eyes. The past year has seen the highest inflation rates in the last decade at 5.4%, according to the Consumer Price Index (CPI). That means if your savings account is earning 0.6%, you’ve lost 4.8% in purchasing power over the last 12 months. Get your money to work for you by considering:

  • Low risk, dividend-paying stocks
  • CDs, bonds and other investments with various maturities to prepare for higher rates
  • Direct lending vehicles through vetted, respected facilitators
  • Investing directly in property, small businesses or other tangible assets
  • Invest in yourself to learn a new trade or skill

Lock in fixed rates on debt

Inflation can be your friend if you have a low interest, fixed-rate loan. For example, inflation will tend to increase the value of your house over time, yet your monthly payment will remain the same. So borrowing money at a low fixed interest rate, while the underlying property value increases with inflation, can be a strategy to consider.

Delay large expenditures

Do your part to reduce demand by postponing large purchases. Consider delaying the purchase of a new car, adding to your home or taking an overseas trip until demand flattens and prices come back to a normal rate.

It’s impossible to avoid the effects of high inflation altogether, but with some smart investing and the willpower to temporarily curb spending, you can reduce inflation’s impact on your personal bottom line.

What you can read next

Mason jar with Wedding tag on it
5 Tips to Help You Save When Attending a Wedding
Pencil lying on tax form
Taxes and Charitable Giving
Person looking at paper with credit score on it
Tips to Improve Your Credit Score

Recent Posts

  • Couple sitting together managing their finances.

    Money Management Tips for Couples

    Couples consistently report finances as the lea...
  • Woman vlogging as a side hustle.

    Hustling for Extra Income – Don’t forget the taxman!

    From supplementing their current income to repl...
  • Person checking their personal bookkeeping for their taxes.

    Start Your Tax Planning NOW!

    Keeping your taxes as low as possible requires ...
  • Businesswoman’s hands tearing a piece of paper

    Debt: Gone But Not Forgotten by the IRS

    With the ups and downs of our economy over the ...
  • A house that has been sold.

    The Home Gain Exclusion: Make Sure You Qualify!

    Across the country, many homeowners are cashing...

Categories

  • Announcements
  • Business
  • Financial Planning
  • Personal
  • Retirement Plans
  • Tax Tips & Information
  • Uncategorized
  • Wealth Management

Schedule your 1-to-1 financial planning consultation today!

Visit our Office

Get Directions

Speak with a Staff Member

419.629.3494

Contact Us

Send A Message
Cisco & Co CPA

Mark J. Cisco & Co, Ltd.

419.629.3494

419.629.2444

Hours:

  • Monday: 8:30AM - 4:30PM
  • Tuesday: 8:30AM - 4:30PM
  • Wednesday: 8:30AM - 4:30PM
  • Thursday: 8:30AM - 4:30PM
  • Friday: 8:30AM - 4:30PM
  • Saturday: CLOSED
  • Sunday: CLOSED

5030 State Route 66
New Bremen, OH 45869

PO Box 114
New Bremen, OH 45869

  • HOME
  • SERVICES
  • WHY US
  • FINANCIAL RESOURCES
  • CONTACT US

PAYROLL PORTAL

SIGN IN

FOLLOW US!

Copyright © 2021 Mark J. Cisco & Co, Ltd.   |  Website design by Marketing Essentials, LLC   |   Privacy Policy | Site Map

TOP