Genar & Juan Gymsplain Inflation
On this episode of Financially Naked: Stories from The Financial Gym, our host is Genar Mendez, Level 2 Certified Financial Trainer. Juan Valeriano, a fellow Trainer, joins us today to discuss something that touches our daily lives, inflation. Many folks have felt the impact of inflation recently, so Genar and Juan talk about what it is, what causes it, and how you can protect your finances to combat it.
Podcast Notes
According to NerdWallet inflation is the rate at which the price of goods and services increases. As a result of inflation, the value of your dollar will decrease over time. Inflation is not the price of just one specific set of items but a rise across all goods and services across multiple sectors.
Inflation isn’t always a bad thing. The goal is less than 2% a year, and trouble starts beyond that. The Labor Department and the Consumer Price Index measure this figure.
There are two types of inflation: ‘cost-push’ and ‘demand-pull’.
Cost-push inflation: This happens when prices increase because employees are asking for higher wages. This causes production costs to rise and businesses must raise prices to keep up.
Demand-pull inflation: When there’s a high demand from consumers but a shortage of products, this causes price surges.
Inflation is cyclical and often a chain reaction. Each company passes the price increases until they trickle down to the consumer.
In the US right now, inflation rates are being impacted by the steps taken during the lockdown: printing more money, supply chain issues, stimulus checks, and lowered interest rates.
There has been a shift in the workforce over the last few years, especially with how employees and employers interact. There were a lot of vacant positions, so employers had to offer higher wages. Higher wages lead to higher costs, which leads to the chain reaction mentioned earlier.
Advice for the listeners:
Inflation affects our everyday lives. In general, the most immense burden is on the lowest-income households.
Not every household purchases the same goods, so the inflation rate touches everybody differently.
With interest rates rising, folks who carry balances on their credit cards will also be affected. If you have credit card debt, paying that off as quickly as possible should be your main priority.
If you don’t have a High-Yield Savings Account (HYSA), it’s time to open one. Your emergency fund can live in an HYSA so that you can take advantage of the great interest rates.
Ask for a raise at work. If you need salary negotiation tips, check out these resources:
Outside of general savings goals, you also want to invest your money. Investing can be in a taxable brokerage account or tax-advantaged retirement account. There are many simple ways to get started, including Robo-advisors, which require very little technical knowledge about stocks to become an investor.
Work with a Financial Trainer. If inflation or finances, in general, are a stressor in your life, get in touch with The Financial Gym. There are options to help you get financially healthy, including one-on-one help through the Accountability Program and Trainer on Demand!