Inflation In Flames

What’s What?

This post was NOT supposed to be THIS long (so if you make it to the end, thank you). It was supposed to follow the outline of the rest of the posts in my ‘In Case You Missed It’ blog series: short and sweet. However, the more I researched, the more curious I became and the more curious I became, the more appalled I became and before I knew it, I was typing a regular blogpost and now we’re here. I present to you… Inflation in flames, or inflamed, I forget.

So, what is inflation?

Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year

IMF.org

In November 2021, the U.S. Bureau of Labor Statistics reported the national inflation had reached 6.8%, making it the fastest pace since 1982. Fast forward to now, The Labor Department released its latest on the economy where consumer prices have made a 7.5% increase over the last 12 months, which is the steepest increase in 40 years. The inflammation of prices ranged across the entire economy, from food and housing to cars and gas to energy and utilities.  Next Advisor reported that the January consumer price index (CPI), which measures changes in the cost of food, housing, gasoline, utilities, and other goods, rose by over 7% over the past 12 months — the largest inflation surge since June 1982.

Inflation Information

What This Means

• Interest rates going up for: mortgages, car and business loans, and credit cards, loans/lines of credit
• Increase in annual interest on U.S. Treasury bonds
• Increase in consumer costs across entire economy: rents (fastest past in 20 years), electricity (sharpest rise in 15 years), furniture and household supplies (largest one-month increase since 1967)
• A volatile stock market
• Increase in Food & Grocery costs
• Increase in price for new home builds and new cars for consumers due to increase in demand and decrease in supplies and labor
• Increase in Retail prices – some business owners (small to big) have increased prices (paid by consumers) by 6-10%, from a local smoothie spot in Sacramento to Chipotle with its 2,788 locations. Among the reasons why? “Climbing wages can feed into inflation as companies pass rising labor costs on to consumers”, reported the NY Times.

Main Reasons Why Inflation Is So High

• Supply and labor shortage – IE: computer chip scarcity caused new car prices to rise + 700 dock employees at Cali’s twin ports contracted COVID
• Supply chain disruption
• Supply and demand imbalance

Beat or Benefit from Inflation

At first, Federal Reserve Chairman Jerome Powell indicated inflation would be temporary, or “transitory,” and NPR reported that only in recent months has he acknowledged it has been “more persistent”. That is all well and good however, if you are looking to brace yourself to benefit from or beat this inflation, continue reading below for tips.

• Everything’s negotiable: the worst you can hear is no if you ask for any deals, discounts, promotions, or programs you may qualify for (think home Wi-Fi and cell phone plans), plus other services like insurance premiums, cable bills, the APR on your credit card(s) and gym memberships as suggested by CNBC.
• Use apps and websites like RetailmeNot to find deals and discounts (Rakuten or Ebates finds this for you automatically; click here to read the Remember Ebates? post.)
• Use cash back programs like Ebates to receive cash back on everyday purchases including groceries, office supplies, pet food and supplies, clothing & shoes, electronics and travel & lodging. Click here to sign up for Ebates and get $30 when you spend $30!
• Memberships at spots like Costco, BJ’s, Sam’s Club, etc. – save big and buy bulk on food, household supplies (and furniture) plus, gas, liquor, and pharmacy needs. For President’s Day 2022, Sam’s Club is offering 16% cash back on new memberships!
• Put off purchases that can wait – until supply chain disruptions have subsided.
• Save your money – an emergency fund is essential as it shields one from relying too heavily on or apply for new credit cards or other high-interest debts
• Plan out your restaurant visits, grocery list and meals – I bet almost everyone buying grocery food noticed the spike in their grocery bill + the USDA reported in their Food Price Outlook that:

In 2022, food-at-home prices (grocery store or supermarket food purchases) are predicted to increase between 1.5 and 2.5 percent, and food-away-from-home (restaurant purchases) prices are predicted to increase between 3.5 and 4.5 percent. Price increases for food away from home are expected to exceed historical averages but be at or below the inflation rate in 2021. Upward pressures on meat prices are expected to ease in the latter half of 2022. Price increases are expected to more closely align with 20-year averages for most other food groups.

USDA.gov

• Cut expenses – excessive eating out, premium/elective monthly services, using gas unnecessarily, etc.
• Learn all you can about the rights and protections you have as a renter

• Have a diversified portfolio of investment options –

1. bonds
2. Treasury inflation protected securities (TIPs)
3. Real estate
4. Equities
5. commodities

By the way, I am NOT a financial advisor (obviously). These are simply ideas that I either do myself or have come across about the subject and would consider myself. However, currently, I am not publicly sharing my personal financial plans and decisions. Check out Nerd Wallet, CNBC Money, Next Advisor, Clever Girl Finance, The Budgetnista, and The Greater Washington Urban League, or The Financial Diet for more financial planning information.

Good news about inflation

• If you receive Social Security or Supplemental Security Income benefits, you’ll see your payments go up because of rising consumer prices. The Social Security Administration (SSA) announced a 5.9 percent benefit increase for 2022. For more detailed information about that, check out this fact sheet from the SSA.
• Food Stamp Benefits Got Their Biggest Permanent Boost Since 2006
• Other federal programs and services are still in place to help those who need it when they need it (hopefully; I just remembered the COVID unemployment debacle and *sigh* *fingers crossed)
• Experts and policymakers feel the main driver of inflation (global supply chain disruption) will level out sooner than later, naturally returning prices to normal.

Bad news about inflation

While experts and policymakers firstly thought inflation wouldn’t last or would level out sooner than later, in the meantime, wages have not risen with the increase in Cost of Living (COL), let alone inflation. Check out what the Census reported on Income, Health Insurance, and Poverty here. Meanwhile over at the Bureau of Labor Statistics (BLS), they seem to show evidence of this in their January Employment Situation Summary, which flat out stated that wages have increased very little. However, click here and read under the Establishment Survey Data section to learn which exact industries have added jobs and which industries have experienced continued employment growth (higher wage and higher career growth potential).

If we turn to the federales at The Fed, Fed Chairman Jerome Powell signaled that he and his colleagues are likely to begin raising rates in March. This signal came at the conclusion of a two-day meeting and after seemingly acknowledging that Americans are facing increased inflation in more than 2 out of every 3 categories (food, housing, gasoline) the government tracks and it being particularly hard on people with limited incomes, living paycheck to paycheck.

Unfortunately, us U.S. citizens do not seem to have a say in who is on the board of the Fed but just know that the current chairman is likely to be “easily confirmed”, as reported by reuters. The U.S. Senate banking committee will hold a vote on advancing the nominations of a slate of nominees (picked by President Joe Biden) to the Federal Reserve on February 15.

Speaking of Joe, click here to read the very brief and borderline babbling statement on inflation that the White House released back in December. Then, click here to read the recent CNN article that outlines Biden’s comments on inflation being temporary and at its peak in December, his “massive” economic and climate package, the mid-term election coming up “where Democrats are trying to keep control of their very narrow majorities in Congress and Republicans have a real chance of flipping control”, gas being the highest its been in 70 years, Jared Bernstein defending Joe and his administration’s outlook and actions on inflation, good ole Joe’s prediction about the future of inflation, and much, much more.

PLUS

According to the NPR, “in addition to raising interest rates, the Fed is expected to gradually begin shrinking its portfolio of government debt and mortgage-backed securities later this year. Doing so is another way to fight inflation, by pushing up long-term borrowing costs across the economy.”

AND LAST BUT NOT LEAST

As we’ve all noticed or heard, mortgage rates have already risen to their highest level since the start of the pandemic. Click here to read Freddie Mac’s news release on the matter titled ‘Mortgage Rates Continue to Move Up’.

What’s Luxe?

All I have to say to all the above is that midterm elections are on Tuesday, November 8, 2022 where all 435 seats in the House of Representatives and 34 of the 100 seats in the Senate will be contested.

Because of this post, I learned a lot of fresh (more) information about our how government works and this is what stood out to me the most: The U.S. Senate Committee on Banking, Housing, and Urban Affairs is one of twenty Senate committees responsible for conducting Senate business related to specialized areas of legislative interest. Moreover, “the Committee plays an integral role in managing legislation that affects the lives of many Americans. These areas of jurisdiction include, but are not limited to: banking, insurance, financial markets, securities, housing, urban development and mass transit, international trade and finance, and economic policy”, states the Senate.gov website. Furthermore, the Committee is currently made up of 24 Senators; 12 Democrat, and 12 Republican.

Aside from involving and familiarizing yourself with your local, city, and state policy issues, policymakers and elections, know that federal agencies like the U.S. Department of Health and Human Services (HHS) “administers more than 100 programs across its operating divisions. HHS programs protect the health of all Americans and provide essential human services…”.

Programs and services like SNAP (food stamps), TANF, Medicare + Medicaid, Low Income Home Energy Assistance Program (LIHEAP), the Weatherization Assistance Program (WAP no Meg & Cardi), Mental Health and Addiction, and the Substance Abuse and Mental Health Services Administration (SAMHSA) are ALL available to those who qualify but most importantly, who (eligibly) apply.

Please pass this resource on to anyone who it may help. I have used some of the programs above in the past when I needed them and won’t hesitate to use them if I ever need them again. Remember, the (federal) government is supposed to take care of its citizens, especially during trying times and trying times look different for everyone. For DC residents and government employees, look at this page for ALL the resources available for any utilities assistance. Next Advisor’s list of utility bill(s) relief in every state may also be handy and helpful.