Cents & Sensibility —
A challenge to financial security

Beth Peabody

Advice offered in last month’s column suggested that readers avoid gambling short-term with their savings by acting on “hunches” and “sure bets” to steer their investments. In turn, readers were encouraged instead to become investors to insure long-term financial security.

A challenge to financial security over the past year has been the soaring rate of U.S. inflation. Despite this rate edging a bit lower more recently, the annual rate of over 8% in April remains close to the fastest pace in four decades. Prices for groceries, airline travel, dining out and other services are rising as consumers shift their spending patterns. In fact, airline fares increased almost 19% from a month ago at the fastest rise on record and gas prices have risen more than 40% from a year ago.

In an environment when prices are rising everywhere, people may be anxious about their finances. The U.S. Federal Reserve has raised its benchmark a few times this year, with promises of further rate hikes in 2022. The impact of these moves has pushed mortgage rates, car loans and floating rate debt like home equity lines of credit higher.

While the soaring rate of inflation cannot be controlled by an individual, one can lessen the impact on finances by taking the following steps:

  • Do not panic and make purchases because of inventory shortages. Do you really have to get a new car, a new home or new appliances? If you can wait, do so.
  • With a surge in food prices and labor shortages, do not dine out as often. Consider a picnic or potluck with friends instead.
  • Use your savings to pay down credit cards and other loans that have variable interest rates that have certainly moved higher.
  • Save gas by carpooling to work or to see friends and run errands more efficiently. Ride a bike instead.
  • If you order carryout, pick it up instead of having it delivered to avoid extra fees.
  • Brew coffee and tea at home. Make your own lunch.
  • Seek out free entertainment or programs offered during the summer months.

As mentioned in past columns, the pressure of rising interest rates has impacted financial markets in many negative ways. However, a positive impact for those who are “savers” should be higher interest earned on money market and savings balances. In addition, interest payments from new bond purchases will be much higher than those offered for most of the past decade.

Unfortunately, inflation rates may not ease in the near future. The action item for May is to take some of the steps outlined above to gain confidence in your finances and to weather this unusual period.

Beth Stegner Peabody is CEO of Stegner Investment Associates, Inc., and a 1979 graduate of Sacred Heart Academy.

Previous Cents & Sensibility columns may be viewed at https://therecordnewspaper.org/editorials-commentary/cents-sensibility/

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