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Inflation Hits Highest Level Since 1981

The latest CPI (consumer price index) data for May was released today, and it read at its highest level in over 40 years – 8.6%!

In nerdy math terms, that means (in general) what you bought for $100 one year ago would now cost you $108.60 in today’s dollars.  

In your own life, you may have noticed things that you purchase often like your Chipotle burritos, Costco grocery bills, drinks out at bars, Uber rides, etc. (we don’t need to mention the obvious gas prices) all seemingly gone up over the past year. One specific item I noticed in our regular groceries the other day was the organic chicken thighs that we get from Costco:

A few months ago (February) we were able to purchase these packages (above) for just about $20. When we went for our monthly grocery trip a week ago, that price shot up to ~$32. That’s almost DOUBLE the price from a few months ago.

Some goods and services are getting hit harder from inflation than others, but what was once money’s “silent killer” is now very loud and reminding the world what it’s always been doing in the background.

Inflation destroys your money’s purchasing power

The silver lining (in my opinion) to recent high inflation is it has awoken many people who previously had no idea what inflation was, and shown them that they can’t just save their money in a bank savings account (national average interest rate for savings accounts is 0.07%) if they wish to get ahead financially.

This realization is pushing a lot of people who were previously neglecting their personal finances, to now prioritize their finances and finally look into investing their money!

Now I know what your next thought probably is...

“Who would want to start investing in this stock market!?”

A fair question to ask, and I will let one of my favorite investing role models (Warren Buffett) answer this question:

“The most important quality for an investor is temperament, not intellect.”

What this means is that the most successful investors know that short-term market volatility is normal and nothing to be scared of. It’s a feature of the stock market, not a bug, and the best investors know that long-term patience (buying and holding quality assets) is how you win the money game.

It may also help to know that the S&P 500 has had a historic average annual return of 10.5% since its inception in 1957 (65-year track record).

So although current times may seem bleak, know that the market has experienced these events before (high inflation, war, oil embargos) and continued to reach new all-time-highs, despite short-term volatility in the moment(s).

My final parting words for you in these volatile times are this:

  1. In regards to high inflation - cut back on your budget where you can and hunker down in the short-term (now’s not the best time for extravagant spending). Consider cheaper ways to have fun this summer (going to the community pool, local hiking trails, bike riding, having friends over for drinks/dinner hangouts) over the more extravagant ways (tropical vacations, cross-country trips, bar/club/restaurant scene). Embrace laying low to the best of your abilities.
  2. In regards to investing – continue investing in your 401k, IRA, and/or taxable brokerage account. Don’t be fearful of a falling stock market, think of this as a great long-term opportunity to “buy low” and hold for future fortunes.
  3. In regards to psychology – Times are difficult, but they are certainly not new world events. We as a species are extremely resilient and have come out of these events in the past even stronger. Have faith in “us” (the human race) to continue being the resilient species we always have been.

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