May was a difficult month in our economy as inflation increased to a 40-year high. The Consumer Price Index (CPI) increased to 8.6 percent, one full percent from the month before. Everyone has felt the squeeze, primarily at the gas pump, the grocery store, and rent or mortgage.
Current figures have surpassed all projections of hope that inflation may go down soon and have fueled fears of an impending recession. The best way to fight back is to understand the impact of our current economic landscape, use that information for indicators of the future, and take steps to be smarter with your money.
Although all of the following factors are not directly tied to market prices, they add pressure on market investors. When business growth slows, fewer jobs are created, and wages remain stagnant. Staying in tune with situations throughout the world that impact market investors will help gauge a general outlook.
The War in Ukraine
Updated US sanctions related to the war in Ukraine have prevented investors from buying Russian debt or stocks in secondary markets. Typically investors will buy up this kind of debt at a low price to become their creditors. The new sanctions make selling any Russian debt or stocks harder, further pressuring companies that already hold these debts.
West Coast Dockworkers
A new union contract is underway between shippers and dockworkers on the West Coast. Despite being among the highest-paid logistics workers in the United States, dockworkers claim they haven’t had a raise in years and are under constant pressure to work more hours than other union workers. To add complexity to the union contract negotiations, shippers are looking to reinvest profits into more automation, putting union dock workers on edge. This situation can further jam up a strained supply chain and aggravate inflation.
The Covid-related two-month lockdowns in China caused industrial production to fall by about 2.9 percent. Car companies like Tesla, Volkswagen, and General Motors took a sharp hit to production during this shutdown. If you’ve experienced a backorder from one of these companies, this was likely the cause.
The General Outlook
Many economists are skeptical that a more robust monetary policy from the Federal Reserve will help much. Inflation has taken hold globally, disrupting the supply chain worldwide. Nearly four dozen countries have followed suit of the US Federal Reserve, raising their interest rates.
According to the United Nations, global inflation is expected to increase to 6.7 percent. The United States has increasingly become dependent on the worldwide economy, and the global inflationary environment provides a grim outlook for the situation to change anytime soon.
How to Fight Back
The best way to fight back is to protect your dollars. This may require adjusting how you spend, but the investment of time upfront can save much financial hardship. Given the outlook on today’s economy, everyone could stand to think differently.
It’s summertime, the kids are off school, and vacations are typical this time of year. Everyone needs a break, even the kids from being in school all year, but it doesn’t have to be a lofty, expensive getaway. Try exploring your city or neighborhood with fresh eyes.
An oldie but goodie is pitching a tent in the backyard. Break out the charcoal grill for a fire pit, make some s’mores, and tell scary stories. This is great for family bonding time and doesn’t require a colossal hotel fee.
Another fun, low-expense staycation idea is to host a movie night. Invite a few friends over and tell them to bring their favorite movie. To kick it up a notch, you can make it a pot-luck-style gathering where everyone brings their favorite movie munchies. Toss the names of everyone’s movies in a hat and watch them in the order drawn.
The spirit of giving never goes out of style. Sign up the family to volunteer at a homeless shelter, the library, or another community organization. The family will appreciate what they have and help someone in need.
Cut the Coffee Shop
An inner voice might be screaming at this idea, but there are other ways to get your daily dose of caffeine. Five-plus dollar specialty coffee adds up, especially if purchased daily. The coffee shop is convenient, but so is a twenty-dollar coffee maker that will produce a similar product every morning. Budget ten more minutes to prepare for the day and brew that eye-opening beverage from home. You’ll be surprised at how much gets put back into your wallet.
The single most significant liability in today’s economy is high-interest debt. As the Fed continues to adjust rates, credit card and variable interest loans will further bog you down. Develop a plan to pay off these liabilities as soon as possible.’
Easier said than done; you may have taken a crack at a financial plan to get a hold of high-interest debt with no success. Please don’t feel bad; many of us have been there at one point or another. If you’re in this category, contact Advocate Debt Relief. We can help you on your journey to eliminating your liabilities and discovering financial freedom.