Is Inflation a Problem?… Yes!

Earning 2% on your savings account isn’t much better than hiding cash under your mattress considering inflation just came in hot, at 3%, thereby silently killing the buying power of your money and your wealth. Here are 4 things you can do about it.

1. Buy stocks for the long-term:

The stock market has averaged over 12% per year over the last 15 years. Obviously, it’s volatile (big up years and big down years), but if you have some long-term money (and a stomach for the volatility), owning stocks can easily defeat inflation (and most other investments too)

2. Get a better interest rate on savings

Some money market funds still yield 4%. For example, Vanguard offers a money market fund (VMFXX) that still yield over 4%. Consider parking cash in a money market fund (daily liquidity) to combat high inflation.

3. Only keep as much cash as you need

Invest the rest… prudently!! Similar to buying stocks (see #1 above) you can also move money into bonds, CDs and a wide variety of investment securities to diversify risks and still earn a rate of return significantly higher than inflation.

4. Take advantage of tax-advantaged investment accounts

Every penny helps (and taxes make a BIG difference). For example, people bicker over which stock market strategy or ETF is the best, but then they go buy it in a fully taxable brokerage account. If you are eligible, consider buying stocks in your individual retirement account (“IRA”) or 401K at work because it can save you much more than just a few percent per year, and over the long-term it can really add up!

Bottom Line:

Inflation stinks. It’s basically caused by excessive government spending and a hot-growth economy. You personally cannot do much to slow inflation (vote) but you can do some powerful things do offset this silent money thief (such as the four specific things listed above).