Business
With so many people worried about inflation in the coming months and years, let’s talk about some things to keep in mind in an inflationary environment…Remember that Social Security and government pensions are inflation adjusted. If inflation is extreme, then you’ll see a nice increase in these income streams. But also keep in mind that the metrics that the government uses to calculate cost-of-living adjustments on these benefits exclude the costs of food and fuel, so the government numbers aren’t a true representation of actual inflation.Cash is king but ROI is queen so don’t be a joker, Jack. It’s important to have enough in the bank for a good emergency fund, but it’s just as important not to have too much in the bank. Even if interest rates increase on CDs, money markets and savings accounts, those rates aren’t going to be rising at the same rate as inflation, so you’re going to constantly be safely losing more and more money if you keep too much in cash.Lock in low rates while you can. If you haven’t already refinanced your mortgage or consolidated consumer debt to get the lowest interest rate possible, it would be a good idea to do that before inflation really kicks in and rates start to increase.Avoid long term bonds. If you’re buying long term bonds now, you’re locking yourself into receiving pitiful interest rates for a long time. Then when rates go up, you’ll have to sell your bonds at a loss if you want to get rid of them.Stress test your portfolio now. A good advisor can help you stress test your current investments to see how they’d fare during a period of great inflation and/or rising interest rates. And while you’re at it, you can find out how your portfolio would behave during a big market crash. Most people will be surprised about the results they’ll see…