Written By: Alli Masoero, CFP® – Zenith Lead Financial Planner

Not Rich, Yet: A blog talking about finance in a way you’ll actually understand.

Welcome to my very first blog!! My name is Alli and I am the newest member of the Zenith team. I have always found it hard to talk to my friends about finance.  So… I decided to start writing things on the internet in hopes they’ll see it. As life is sporadic in nature, I plan to follow the same schedule with these blog posts.

We see headline after headline about gas prices rising, groceries rising, and it feels like almost everything is rising. Lucky for you, scare tactics aren’t my thing. I am going to try and explain inflation in a way you can understand.

Boring stuff alert! Anyway, I think it’s best to speak in terms of the present environment. Here are some explanations on our current inflationary environment:

Drivers:

→   Government Aid: The US printed a lot of money during the pandemic. They issued stimulus checks and other legislation to help Americans financially. This supplied Americans with more money to spend.

→   Excess Savings: Add on all the money you (hopefully) saved in the pandemic. You couldn’t get your nails done, you couldn’t go to bars to watch sports, you couldn’t do much quite honestly. This provided a lot of Americans with excess savings and cash flow after the pandemic.

→   Increased Spending: With more money in our pockets, Americans want to buy everything. Therefore, the demand for products has shot through the roof. 

→   Geopolitical Issues: These issues, especially Ukraine, are disrupting the global trade supply chain. 

Results:

→   Demand Shortages: Companies are having trouble meeting those demands resulting in a shortage of products. Since companies cannot meet demand needs, they will raise their prices to limit the demand. 

→   Price Gouging: As companies catch wind of inflation, some companies may even add an excess premium on their prices to take advantage of the market frenzy.

→   Global Supply Chain Issues: We see pressure on oil and natural gas prices, as well as food prices due to ongoing global trade issues. If you are unable to meet supply, once again – prices increase.

Inflation is simply having too much money in the economy (I know, it’s stupid, but that’s actually a thing). As I mentioned above, with more money there is higher demand for products. The only way for them to counteract that is through increasing their prices to decrease demand.

This is where we find ourselves now. When does it change?

That is why we have smart people at the Federal Reserve. They are legitimately paid to help handle inflation and other economic problems. Please let them handle it, the person on Twitter has no idea what they are talking about, trust me.

In the meantime, adjust your lifestyle and alter your spending habits. Cut back on the things you don’t need until inflation has passed. In order to reach financial independence, you need to weather the storm!

 

 

 

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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