The current inflation rate sits at 2.1 percent, and that’s cause for concern. Industry standards suggest that inflation should be no more than two percent, and some experts are starting to worry. Should you worry as well? Is there anything you can do to protect yourself against inflation? In fact, you can fight back with the help of U.S. Money Reserve. Get the details on what inflation is and how it affects you by reading this article. Then consider the options you have to protect yourself.
Inflation 101—What Does It Mean?
Inflation occurs when the prices of services and goods increase over time. As prices go up, the monetary value of the dollar does not. That means you have to spend more money to get the same amount of goods. For instance, let’s say the cost of a loaf of bread goes up 50 cents over the course of a year. The dollar is still worth the same amount, but the bread now costs $1.50. That’s inflation at work.
The Consumer Price Index (CPI) tracks and measures inflation. It tracks goods and services and calculates price differences over time. Then it assigns a percentage value to indicate the amount of inflation. If the CPI for this year is two percent, for example, you have to spend two percent more on goods and services compared to a year ago. Now let’s look at the impact inflation has on individuals.
Inflation and You—What You Need to Know
You’ve likely heard pundits grumble about inflation on news channels. Maybe, at the time, you didn’t think that inflation directly impacts you. Inflation is just something for economists and bankers to worry about, right?
In reality, you can feel the burn of inflation in your daily life.
Less Purchasing Power
Have you noticed that your paycheck isn’t stretching as far as it used to? That’s because of inflation. You may start to face this issue as soon as you flee your parents’ nest. Students attending college today are expected to pay much more than their parents did for tuition and fees. A student who attended a four-year college in 1975–1976 spent $10,088 (adjusted for inflation). Compare that to $30,405 a student would have spent in 2015, and you can see why it’s more difficult to afford college these days.
Next, you graduate college and start thinking about moving into a home. People today can expect to pay 33 percent more on a home than homebuyers did four decades ago.
We also spend more money on food. Those fresh fruits and veggies you love cost 40 percent more than they did 30 years ago.
These are just a few examples of products that have inflated in price. As you can see, if salaries don’t increase at the same rate, it becomes much more difficult to afford the things we were able to buy in the past.
Retirement can become more difficult in times of high inflation. As long as inflation continues, you can expect to pay more and more each year of your retirement. That can make it difficult to maintain the standard of living you desire when you retire.
This is true even when inflation is relatively low. Retirees have to devote a large part of their budget to healthcare, an industry that often experiences higher-than-average inflation rates. For example, in 2014, medical expenditures increased 5.3 percent according to LIMRA, which is much higher than the desired two-percent inflation rate.
Interest Rates and Inflation
No one wants to pay higher interest rates, but when inflation goes up, interest rates increase as well. That means you can expect to pay more interest on your mortgage, credit cards, and personal loans.
You will likely spend less as interest rates increase, so it’s a good idea to keep some of that extra money in a savings account. However, don’t expect to earn a lot of interest. The interest rates on savings accounts typically aren’t adjusted for inflation, which means they hardly improve your purchasing power.
If you’re feeling a little stressed after reading this cautionary information, take the opportunity to learn how you can protect yourself against inflation.
How to Deal with Inflation
You can’t change inflation rates, but you can change how inflation affects you personally. It’s actually easier than you might think, too. Below are some ways to lessen inflation’s impact on your life.
Look Beyond the Dollar
If you look at your portfolio, what do you see? You probably have a lot of ventures that are backed by the dollar. That can be an oversight. The dollar is susceptible to inflation, so the monetary value of your assets can decrease when inflation increases. If you want to ensure that your portfolio is better protected against inflation, you may need to diversify beyond the dollar.
What can you invest in if not the dollar? Consider U.S. companies that make money in offshore natural resources and purchase shares in companies that mine those resources. You might also consider storable commodities. Many people use storable commodities as inflation hedges.
Add Gold to Your Portfolio
Gold often performs well when other asset classes don’t. That means the market value of gold can increase as the dollar weakens, making gold a strategic asset. Gold can increase returns while decreasing the volatility of portfolios. Simply putting 2–10 percent of your portfolio in gold investments can provide a degree of risk protection.
Turn to U.S. Money Reserve
If you are unsure about putting your money in gold, let U.S. Money Reserve help you. U.S. Money Reserve has been in the business of distributing precious metals for over a decade, and during that time, it has helped more than 400,000 people buy pure gold, gold coins, and other precious metals. The company understands how gold performs in various market conditions and has experts available to advise you when you want to diversify or build your portfolio. In fact, you can speak directly to an account executive to receive personalized recommendations based on your specific situation.
These personalized recommendations are possible because of the client-connect advantage at U.S. Money Reserve. U.S. Money Reserve conducts business over the phone, allowing the account executives to make real connections with the company’s clients. Handling business over the phone also makes each transaction safe, secure, and accurate.
Take advantage of U.S. Money Reserve’s industry knowledge by ordering your gold from the company today. A representative will answer your questions and help you purchase the right investments for your portfolio.
Read our recent article on U.S. Money Reserve: http://analystoffinance.com/2018/04/investment-strategies-morningstar-vanguard-u-s-money-reserve/