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Spooking You Out? Thumbnail

Spooking You Out?

Inflation Spooks Public, Keeps Fed on Guard,” was the title in last week’s Wall Street Journal article.

It explained why Federal Reserve policymakers are set to leave the benchmark federal funds rate at the highest level in 20 years – to battle inflation.  

For most of the past two decades, we had gotten used to low inflation, yearly around 2%.

Then, BAM!, the pandemic hit, and inflation jumped to over 7%, as measured by the Consumer Price Index (CPI).

This past year through April 2024, inflation has moderated to about 2.7% but still has the Federal Reserve worried, in part because many people “hate inflation so much,” as the article points out.

Are you trying to keep up with the Labor Department’s monthly release of the CPI? And how is that data translating to the management of your portfolio and longer-term planning?

I have worked on financial plans with countless Coffeehouse Investors over the past 25 years.  

These investors have shared with me the wisdom of ignoring the national CPI and focusing instead on their personal price index.

Are you monitoring yours?

Your personal inflation rate – the rate at which your expenses increase year over year is “the” essential power setting of your financial plan.

I am not suggesting you track your spending down to the penny, but it helps to have a general awareness of your yearly burn rate so that you can compare it to last year’s burn rate, and the year before that.

If your expenses are consistently increasing 2%, 3%, 4%, or 5% a year, you need to integrate that figure into your financial plan, because this number will quite possibly be the biggest driver of the sustainability of your portfolio over your lifetime.

It is a matter of knowing where you spend your dollars.

Simple as that.  

I’ll let you take it from here.

Gain Clarity With a Financial Plan

Let's help you understand your personal inflation rate and build a financial plan that sustains you throughout retirement. Connect with me on a complimentary strategy call and get started today.