This Week In Your Wallet: Moves To Make In The Face Of Inflation
Over the last few weeks, we’ve devoted a lot of time in this newsletter to talking about the markets — how volatility is to be expected and how it’s best to keep yourself calm and not try to time things. There’s another big factor in the headlines, though, and that’s the I-word. Inflation.
If you’re a child of the ’60s, like me, or even the early ’70s, you remember double-digit inflation. Maybe your parents — like mine — had a mortgage with an interest rate of 18 percent. Maybe they lined up — like mine — during the gasoline shortages of the ’70s.
It’s been so long since we’ve had anything other than low, single-digit inflation (it’s still below the Federal Reserve’s target of 2 percent), that it’s hard to remember otherwise. But inflation — or the worry of it — along with higher borrowing costs (though nowhere near 18 percent) were among the factors cited when the markets took their downward turn.
We can all use a little refresher course in inflation at a time like this — and The New York Times complied. Here’s the skinny: Inflation, though it can be frustrating for consumers, is a sign of a strong economy. Last year, the American economy grew 2.3 percent — better than anticipated — and it’s expected to rise 3.2 percent this quarter. This will likely increase the prices on the things we buy every day. How and why? The Great Recession ended in June 2009 (I know it didn’t feel like it ended, but statistically it did), and the U.S. began a slow, plodding recovery. It took until a couple of years ago for wages to begin to tick up. But that’s finally started to happen, and with more money in their pockets, more people are buying more goods and services.
That demand for more goods and services means that more hands on deck are needed to make those goods and produce those services. That increased need for labor pushes wages higher (again, more money in our pockets). But companies that produce the goods and services don’t want to see their margins squeezed, so they raise their prices. And those higher prices get passed along to you.
The inflation rate you read about in the headlines is a measurement of those prices. There is the Producer Price Index (or PPI) — the price that producers charge for their goods and services — and the Consumer Price Index (or CPI) — the prices consumers pay for goods and services. Generally, they move in tandem (although the PPI sometimes moves first). But the CPI is the one used to track increases in the overall cost of living.
Should you be worried about this? There’s nothing you can do about it, so don’t waste your energy. Instead, focus on the moves you can make: locking down your short- and long-term interest rates before they move higher (as the new Fed Chair Jerome Powell has indicated they will). This may mean a balance transfer on a credit card or refinancing your student loan debt. And take the time to make sure you’re capturing the best interest rates as possible on your liquid savings. The best savings rates listed on Bankrate.com are around 1.5 percent (you can get that with no minimum from Goldman Sachs Bank, Synchrony Bank, Dollar Savings Direct and others, although there are also no check-writing privileges). The average savings rate? It’s 0.09 percent. Ouch.
IRS Scam Alert
In other news, we’ve got a new tax season and a new batch of scams aimed at pocketing your refund before you can. In just days, the number of potential tax scam victims has skyrocketed from just a few hundred to several thousand, according to the IRS. This year, scammers are posing as IRS agents. If you get a call from a strange number demanding you return your refund money — or claiming you’re guilty of fraud — hang up. Then, report it to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 or at TIGTA.gov.
Additionally, if you received a direct deposit into your account that you didn’t expect — without filing your taxes first — you can almost bet it’s been put there by scammers who plan to take it off your hands later by calling you to demand for it back. Alert your bank, and consider shutting down that account right away. If you received a paper check for a tax refund that you also didn’t expect, write “VOID” on the check, and return it to the same regional service center that the check came from immediately. And finally, if you go ahead and accidentally cash that fraudulent refund, the IRS suggests that you send a personal check to your local IRS service center with a note saying it’s repayment for an erroneous refund. Don’t forget to let them know you were a victim of a scam.
Physically And Fiscally Fit
Health is the new status symbol, and consumers are paying big bucks to pursue it — which explains why the global wellness industry is now a $4 trillion business, according to The Global Wellness Institute. That doesn’t mean you have to break the bank to achieve your fitness goals. As we enter the season of nicer weather, consider severing ties with that pricey gym and heading out for a hike or a run. Or do your crunches in the comfort of your living room. Free fitness apps like Aaptiv give you access to unlimited audio workout classes (or recordings of personal trainers telling you what to do). Ready, set, download.
Bathroom Reading?
Finally — I don’t know where you catch up on this newsletter. But if you happen to be, say, on the throne… Look at how the toilet paper’s hanging. According to Inc., it might say a lot about you — and your earning power. Those who roll under (leaving the loose end close to the wall) “tend to be more relaxed, more dependable and seek relationships with strong foundations,” while those who roll over (leaving the loose end away from the wall) might “like being in charge, like organization and order and are likely to overachieve.” The good news for the latter? Two-thirds of them earn over $50,000 a year; the roll-under crowd earns substantially less. #JustSayin’.
Have a great week,
Jean
