According to U.S. Labor Department, the annual inflation rate for the United States is 6.8% for the 12 months ended November 2021. This is the highest annual inflation rate since June of 1982. That’s nearly 40 years ago so let’s revisit what happened when Americans were obsessed with the Rubik’s Cube and ET: The Extra-Terrestrial was top grossing movie of the year.
One of the worst things any leader can do when faced with a challenge is to blame others. It doesn’t matter if they were elected, appointed, or volunteered to be in that position. Our 40th President knew that, and Ronald Wilson Reagan faced his first task head-on by promoting a free market and capitalism.
The four pillars of Reagan’s economic policy were to reduce the growth of government spending, reduce the federal income tax and capital gains tax, reduce government regulation, and tighten the money supply in order to reduce inflation. He was able to help us navigate out of those troubled waters and steer us on a prosperous course.
We are dangerously close to the same situation and sadly, we don’t have The Great Communicator in the White House. Instead, we have an economy roaring toward stagflation (slow economic growth at a time of high inflation) and uncertainty.
What does this mean to Americans over the Christmas holiday season? With the doom and gloom of the Covid variants, travel restrictions and shipping delays, we need to expect prices to keep rising until the 2022. Those increases include gas, groceries, medicine, and electricity. There doesn’t seem to be a ceiling on these prices and Americans on a fixed income are worried that they will need to dip into savings to keep the lights on.
The solution is not simple and is not entirely up to our elected leaders. Politically, we have the right to connect with our elected officials (local, state, and federal) to let them know our concerns. On the business front, we need to inform the Board of Directors of large companies that we SEE the large profits they continue to make while Americans are struggling. The last defense is from our individuals and our community. We need to look at our spending habits and ensure we are supporting American based companies that hire Americans. It would be wise to support the small business owner who is fighting to keep their doors open and seek out products and services that keep our economy strong.
Looking back, we can see that interest rates will also continue to rise. That means don’t leave cash in an account that is not outpacing inflation. One of the best lessons I learned from my mentor, Paul J. Meyer when I was transitioning out the military is: “Put overalls on your money. It needs to be working for you and creating more wealth.” Do some due diligence on banks and credit unions that offer online services instead of those from a brick-and-mortar location. Their overhead is lower and can give you a more competitive yield. Just make sure that it is either FDIC or NCUA backed to protect yourself. You don’t have do explore alone – take a moment to review your finances with a professional and become more active in your investments.
On the flip side of that coin, make sure you set a budget for any more holiday spending and stick to that budget. Use online coupons, loyalty programs and flash sales to find some great deals this year. However, not every gift comes at a hefty price. Think back to when your family all gathered for the holidays. Can you even remember what gifts you received or gave in 1982? Odds are that you valued the time you spent with your loved ones over the presents. How about making memorable moments together by doing a family project? It could be something as simple as having each family bring ten photos from time at “Grammy’s house” during Christmas. You can scan the photos on your phone and share them or upload them to the cloud. Each family gets to tell stories about what they remember and create new memories in the process. It’s not likely that we will ever see $3.00 movie tickets like we did in 1982 but we can take a quick trip down memory lane and laugh about how Solid Gold stayed on TV stations for almost a decade. (If you’re under 35 years old, it’s filled with all the songs that your parents danced to before TikTok and Instagram).