Price spike: What to do as you watch costs rise

By ANNEMARIE SCHUETZ
Posted 11/18/21

REGION — This probably comes as no surprise: Prices of goods and services rose 4.6 percent in October over the last year, according to the Bureau of Labor Statistics (BLS). The separate …

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Price spike: What to do as you watch costs rise

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REGION — This probably comes as no surprise: Prices of goods and services rose 4.6 percent in October over the last year, according to the Bureau of Labor Statistics (BLS). The separate gasoline index increased 6.1 percent. The food index went up .9 percent.

Taken together (the “all-items index”) you get a 6.2 percent rise in prices, up from 5.4 percent in September.

Numbers like that are scary, especially if you live on a fixed income. There’s a lot of talk about inflation right now. Technically, inflation just means that prices are rising.

It can happen to anything: health care, new cars, food, oil.

It can happen because of anything: suddenly everyone wants a toy and there aren’t enough, hundreds of ships are stuck behind a giant stuck ship in a canal somewhere and people can’t get whatever is on those ships, there’s a bad harvest and suddenly certain food prices start climbing.

Inflation can last a decade (see the 1970s) or only briefly (giant ship gets unstuck).

So what’s happening now?

The current state of inflation is the highest since 1991. (In the 1970s, it got over 10 percent in the U.S.)

Increased energy costs, medical care, rents, used and new vehicles and recreation are pushing rates higher, according to the BLS.

Airfares and alcoholic beverage prices decreased in October.

Surging demand is driving some of it. Labor shortages are another cause, as well as supply chain disruption and the pandemic, notes FiveThirtyEight, the data analysis site.

What can we do?

Not everyone has savings to worry about. If you are struggling right now, contact your local agency for the aging and they’ll help.

But if you do have savings, and want to protect them somehow, Narrowsburg resident Matthew Sgritto offered his perspective. He and his partner Gayle Bangalan are financial advisors with Guardian Life.

“Stocks are the best hedge against inflation,” he said. Stock prices tend to go up when overall prices rise. But stocks can also be risky and “the young can incur more risk, because they can wait out a downturn. When you’re 70 years old, you don’t have the time.”

The answer for older people is diversification. If you have savings to invest, “divide it between bonds, commodities, stocks, things with very, very good credit ratings.”

But be careful, Sgritto cautioned.

Treasury bonds are safe, because they’re guaranteed by the U.S. government.

There are municipal bonds that can pay somewhat higher interest; they’re backed by the municipality that issued them. Other government bonds can be bought, and when they mature, you get the price of the bond back plus the annual percentage rate.

On the other hand, there are funds and savings vehicles out there that promise enticingly high interest rates. “Those rates will probably fluctuate,” he said. You could find yourself with far less money than you were counting on.

If you’re worried, you could reach out to a financial advisor for help.

Financial advisors, Sgritto explained, will learn what you need financially and then outline where you can put your money. A good advisor asks about how much risk you’re able to tolerate, what your debts are, how much money from all sources you have coming in.

“Only by understanding their financial makeup can you make suggestions and improve their finances,” he said.

Learn more about inflation, finance and financial advisors at https://www.investopedia.com.

For fun: Explore the Bureau of Labor Statistics and the CPI at https://www.bls.gov/cpi/.

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