Some of us remember INFLATION from the 1970s and 1980s. I graduated high school in 1980, so I remember some of it. Does the recent Consumer Price Index (CPI) report we are going back to the 1970s again?
While nobody knows for sure, most experts think probably not.
The latest CPI report confirmed what economists anticipated: consumer inflation has risen 7.9% over the past year, the largest spike since 1982— none of which is a surprise for anyone who has visited a gas station or grocery store lately.1
With the price of gasoline trending higher, it may be tempting to attribute these prices to the global economic disruptions caused by Russia's aggression toward Ukraine. However, the latest CPI reflected the 12-months ended in February and didn't include most of the oil and gas price increases that followed Russia's invasion of Ukraine on Feb. 24.2
There is a slight silver lining within the CPI, however. The food away from home index, which tracks restaurant purchases, rose 0.4 percent in February after increasing 0.7 percent in January. This could indicate strengthening consumer confidence despite inflation, as consumers continue to eat out.3
While prices are clearly rising, I would offer some perspective on how inflation will bite most families. Many people think of gasoline and groceries as the key areas where families would suffer from inflation. Both budget categories are staples. You need them every month. And most of us can’t just stop buying fuel or groceries. So, they are top of mind, for sure.
According to the U.S. Bureau of Labor Statistics, we spend less than you might think on groceries and fuel.
Food cost as a percentage of the average U.S. household budget has decreased dramatically over time. Back in 1900, families spent about 40% of their income on food. By 1950, it was just under 30%. According to the most recent data from the U.S. Bureau of Labor Statistics, in 2013, the average American household spent about 10% of its total budget on food.
And, the average American household spends 14% on transportation. That includes fuel, car payments, auto insurance, commuting costs, mass transit fares, and transportation for vacations. Fuel makes up about 2.8% of annual transportation costs. We just buy a lot less gas than we used to.
What does this all mean for consumers? It's hard to say, but some predict further inflationary pressures, while others wait and see what the Fed says at its meeting on March 16.
If you have questions and want to talk about your situation and how to protect yourself from inflation, follow this LINK to find a time for us to visit.
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As you visit with financial planners, I suggest a couple of things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor paid by clients, not financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.
- ABC7.com, March 10, 2022
- BLS.gov, March 10, 2022
- Ers.usda.gov, March 10, 2022