The word inflation is getting tossed around a lot lately. You may feel discouraged and confused if your paycheck is silently and inexplicably disappearing. Furthermore, there are a lot of unhelpful rumors circulating.
If you’re a doer, it’s tempting to start making plans for beating inflation. Before you get carried away, it can be helpful to understand what inflation is, what it’s not, and how to understand it better. That way, when it comes time to strategize, you can base your plans on factual information and clear thinking.
Don’t fall for easy truisms. At Portage Bank, we are here to help you keep a balanced perspective, navigate confusing and stressful times, and stay ahead.
3 Myths About Inflation:
1. There is no Inflation (or it will leave soon).
While not many people continue to deny inflation, some people believe it will quickly be fixed. The rise in gas prices, dairy, meat, and the overall cost hike provides a daily reminder to the contrary. As much as we would like to promise otherwise, yes, we are experiencing inflation, and it will likely hang around a bit longer.
The US inflation rate reached 8.2% in September 2022 and is higher than it has been in almost 40 years. The rising cost of living is forcing many Americans to make difficult decisions, such as cutting back on food and other essential purchases.
2. This is the worst inflation we’ve ever experienced.
On the other hand, other people are despairing and panicking over the economic climate. It may surprise you to learn that inflation was worse than it is now a few decades ago. As the Fed put it, “By the summer of 1980, inflation was near 14.5 percent, and unemployment was over 7.5 percent.”
3. High prices drive inflation.
Some of the most common myths surrounding inflation are what causes it. Some people think high prices or rising wages cause inflation. Both of those occurrences are symptoms and indicators of inflation rather than causes.
There are two different movements that drive inflation. The first is when the demand for goods increases, but the supply remains the same. The second is when new money is chasing after the same economic supply of goods, creating a higher demand. Both of these events occurred on varying levels during shutdowns.
Supply chains shut down, as did the demand for many in-person services. However, when the world opened back up, there was a sudden urgent demand and a population with pockets full of government-issued stipends.
These and other factors resulted in the current climate of economic inflation.
What Can You Do?
How can you stay ahead while facing diminishing funds? The good news is that while you can’t control inflation, you can manage your own money. Focus on what you can do. Create a smart and strategic plan so inflation does not have the last word in your life.
Invest in sure things. Right now, especially while rates are high, it’s a great time to invest in a Money Market Account. You can leverage the system so that you are on the right end of the equation and reap the benefits that can come during inflation.
At Portage, we invite you to contact us and ask questions about investments or any other financial concerns you may have during these challenging times.