Navigating Through Uncertain Economic Times

You walk up to the counter, but you’re already filled with dread. You’ve been feeling the sticker shock of rising prices for groceries, gas, and utilities, but this pain seemed to have slipped your mind in the spirit of the holidays. As the cashier rings up your purchase, you flinch as your suspicions are confirmed: the same turkey that cost $22.93 last year is now $28.96, an increase of 21%! You pay the cashier and shuffle out of the store; your spirit dampened a bit. Sound familiar?

According to most forecasts, inflation is expected to gradually fall over the next 18-24 months before returning to normal sometime in 2024. It’s important to remember, though, that a falling inflation rate is still inflation. In other words, a fall in the rate of inflation is not the same as a fall in prices. While a handful of products may experience falling prices, most will continue to see price increases for the foreseeable future, although the rate of increase may slow.

Because of this, it is generally preferable to purchase major items today if you can afford to do so. Major purchases include things like automobiles and homes, as well as durable goods such as washers, dryers, and kitchen appliances. Because prices are likely to rise, purchasing now is generally a less expensive option if you can afford it.

To reduce expenses today, many recommend looking at opportunities to trim discretionary spending to free up more of your budget for necessities. Further, you could try purchasing generic products rather than pricier name brands. Depending on your situation, you could also benefit by negotiating cable or insurance bills, resulting in savings that can protect you against rising prices elsewhere. By freeing up space within your budget, you will be better able to weather whatever the future may bring.

Beyond spending concerns, a bit less obvious is the impact of inflation on your savings balances. While inflation will not reduce the balance of your savings, rising prices serve to reduce the purchasing value of those savings whenever they are needed in the future. Planning for things like retirement, a child’s college, or even future vacations becomes much more difficult in an inflationary environment.

With this context, be sure to evaluate your savings to ensure you are earning the best return possible. Look to structure your accounts by utilizing products such as certificates of deposit (CDs) or term shares that typically pay higher rates. Laddering termed products across multiple time horizons, from short- to long-term, will enable you to earn a higher return that better keeps pace with inflation. Most financial institutions, including Blue, offer tailored products to meet your needs.

Also, be sure to keep a portion of your savings in a liquid account as a buffer against emergencies. If you do not have an emergency fund today, consider starting one. The Accelerated Savings product from Blue is designed to reward you for starting your savings journey.

It may also make sense to contact your financial advisor and review your investment portfolio within the context of the current environment. Financial advisors are trained to help you through challenging times like these and will ensure you are best positioned within your preferred level of risk, all in a diversified way. You should also regularly review the risk tolerance of your portfolio to be sure it is consistent with your investing goals.

As interest rates rise, also be sure to evaluate any outstanding debt. Consider paying down high-interest, variable-rate debt first to protect yourself from the rising rate environment. Balance transfer campaigns can be a great opportunity to lower credit card rates and keep debt balances from spiraling out of control. Tools such as the “debt snowball” can also be effective for ridding yourself of higher-interest debt. If you are looking to purchase a vehicle or home, consider something a bit less expensive to offset the higher cost of borrowing. Be sure to not put yourself in a situation in which your monthly payments may become more than you can afford if prices on goods and services continue to rise rapidly.

Most importantly, ensure you have a relationship with a financial partner like Blue that will support your lifetime financial needs. As a not-for-profit financial cooperative, we exist to serve you in both good times and bad. Please reach out and engage with us if you are ready to discover pathways to realize your possibilities. You can start your pathway to discover your possibilities by clicking here.

Neal Weber

Chief Financial Officer

Jason Buchanan has worked over the last twenty years within Credit and Risk Management at financial institutions of increasing size and complexity — most recently serving as the Head of Operational, Data, Technology, Cybersecurity, and Fraud Risk at BBVA USA.

He received his Undergraduate and Master of Business Administration degrees from Dallas Baptist University and has remained active in both non-profit and faith-based organizations. When they lived in Baytown, TX, he and his wife, Hope, founded a non-profit organization which funded micro-grants for individuals and groups who wouldn’t otherwise be able to obtain funding.

Jason is a technologist at heart, blending the disciplines of risk management with process improvement and technology as needed. His prior responsibilities have included Commercial Credit Decision Engines, Portfolio and Asset Allocations, Operational Risk Management, Credit Analysis, and Portfolio Management & Underwriting Systems.

Jason and his wife, Hope, have five children. Hope is an artist and enjoys leading their neighborhood Bible study. In his spare time, Jason enjoys writing music and reading. Their youngest son Tanner is fifteen years old and joins them on the journey to Cheyenne. With autism, he overflows with joy and energy; a blessing to everyone he meets.

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