May 27, 2022

So, we all talk about what exactly is Inflation? Inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.

Now that we’re on the same page about it, what should you do to protect your personal finances during times of high inflation?  Well, there a handful of things you may consider with your advisor but here are three personal finance tips to consider during times of high inflation :

1) The name is Bond. James (just) Bonds.

• When inflation is higher than the fixed rate of a bond, you’re losing the purchasing power of your money.
• Owning a bond is like making a loan:
  • A Treasury bond lends money to the federal government.
  • A municipal bond lends money to a city or state.
  • A corporate bond lends money to a company or corporation.
• The other side of owning a bond is borrowing. When the mortgage rate is lower than the inflation rate, the bank is taking the bad end of the deal.

2) Wicked Smaht Debt.  Investing vs. paying off your mortgage

• When fixed income rates were much lower than mortgage interest rates, we suggested that clients pay off their mortgage with extra income rather than invest the money.
• Recently, mortgage and fixed income rates are equalizing, so we are coming to the point where it may make more sense to invest your money than pay off your mortgage.

3) Beware the Big Bad Wolf blowing your house down. Re-examine your homeowner’s insurance

• Since home values, raw materials and labor have dramatically increased, it’s important to have enough coverage to replace your existing home in the event of a disaster.

If you are worried about how inflation impacts your retirement & financial foals.