Daily Money - Issue #150: I prefer the Glee version

July 6, 2022 • Issue #150

Hi y’all —

It may be problematic in hindsight, but you can’t deny that Glee was 
a cultural reset. “Don’t Stop Believin’” in the pilot? Sue Sylvester’s meme-able “I am going to create a…” line?? A cappella “Teenage Dream” into the Klaine kiss??? Iconic.

In my opinion, one of Glee’s greatest accomplishments was that it triggered a mashup renaissance. We, as a society, remembered how awesome it is to take two or more amazing songs and remix them to create a high-quality banger. From DJ Earworm to Death Cab for Yeezy, mashups took hold of the nation — and still haven’t really let go. (I’m listening to “Levitating” x “Baby One More Time” as I write this.)

Unfortunately, these days, we’ve begun to talk about a much less fun type of mashup: stagflation. And unlike Madeon’s “Pop Culture,” this mashup doesn’t make me want to crank the volume so high my ears hurt — it makes me worried about my wallet.

What is stagflation, and what can I do to prepare for it?

I called Lauren Anastasio, director of financial advice at Stash, to learn more. She told me that, usually, when inflation is high, unemployment is low. The opposite is also true: When unemployment is high, inflation is usually low.

Stagflation is the exception to the rule. It’s “essentially an economic condition where inflation and unemployment are high but demand for goods and services is stagnant,” says Anastasio, who is also a certified financial planner. Historically, stagflation has been preceded by a shock to the economy, like when there’s an issue with the supply chain or money supply.

Sound familiar?

Both of those events have occurred recently, leading Anastasio to conclude that we’re staring down “a perfect storm” of factors that could lead to stagflation. While it’s not a foregone conclusion — right now, unemployment is still low and inflation is high — the components are in place.

Brian Walsh, a CFP and senior manager of financial planning at SoFi, also underscored that the United States is not in a period of stagflation yet. But he says SoFi customers, many of whom have been experiencing record-high inflation at the grocery store and reading nonstop headlines about the possibility of a recession, have been expressing concern about it.

“People are worried about the worst-case scenario. Stagflation is kind of that worst-case scenario because there’s no good way out of [it],” he says, adding that the normal tools the government would use to improve inflation and unemployment are stymied because they’re counterproductive. “You’re stuck between a rock and a hard place.”

For everyday consumers like me, an economic standstill could cause businesses to cut back on production, which could trigger layoffs. That chain reaction could weaken the job market.

“It really puts people in a position where they have to rely more on their savings. They have to make drastic cuts to their spending or potentially go into debt in order to cover living expenses,” Walsh says.

Yikes.

The good news is that both experts said there are steps I can take to insulate my finances from any potential effects of stagflation. The first is to get my emergency fund up to snuff. Though Anastasio typically recommends I keep three to six months’ worth of essential expenses set aside in cash, I might want to increase that a bit in the face of stagflation.

Next, I should rein in any unnecessary spending. Anastasio suggests taking a step back and looking for opportunities to adjust my cash flow so I have more money coming in than going out. Are there subscriptions I don’t use that I can cancel? Am I eating out a little too often? Can I pick up a side hustle to generate some extra dough?

“It’s an area where you have so much control,” she says. “It’s not just about the little cost savings here and there, it’s more [about] giving you a sense of power over the situation. That’s going to be helpful for your financial anxiety.”

Now is not the time to be adding obligations, either. Anstasio says I should avoid making large financial commitments like upgrading my car, purchasing a Peloton or buying a costly house. If I can postpone those major money moves for a while, it might be a good idea, because I don’t want to give myself even more (inflated) monthly payments to deal with.

Third, I want to get my debt under control ASAP. Walsh says that people with credit card debt may especially suffer in a period of stagflation because persistent inflation will push up the cost of everyday goods... at the same exact time rising interest rates will make carrying balances more expensive.

“Anything with a variable interest rate is going to become more and more expensive and much harder to pay off,” Anastasio adds. “Now is a good time to finally get rid of that obligation.”

Every financial expert has a different theory on the best way to pay down debt, but Walsh is a fan of the snowball method. If I have a surplus in my budget, I can make minimum payments on all my cards and then use the rest to pay off the card with the smallest balance. Then rinse and repeat. (If I don’t have a surplus in my budget, Walsh says I may want to try to consolidate my debt by taking out a personal loan with a low interest rate.)

Once I’ve gotten that all squared away, I might consider putting more money into my investments, Anastasio says. Because the market is down, stocks are essentially on sale — and, over time, the investments I make now will likely grow at a rate that outpaces inflation.

THE BOTTOM LINE

(but please don't tell me you scrolled past all of my hard work)

Stagflation is the worst kind of mashup: a combo of stagnant demand, high inflation and high unemployment. We’re not quite there yet, but we might be soon.

To brace myself for stagflation, I should cut back on discretionary spending, get my debt in order and review my investing plan. Most crucially, though, I should take a deep breath. Anastasio warns against becoming overly stressed about stagflation, because that certainly won’t benefit me.

“You want to have a calm head about what you’re doing financially,” she says.

VIA GIPHY

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RECEIPT OF THE WEEK

check out this wild celebrity purchase

VIA INSTAGRAM

I went to see the rapper Machine Gun Kelly in concert last week. He put on an incredible show, but as the Dollar Scholar, my favorite part was when he talked about — what else? — money. "[New York City] was the first city that actually gave me my first music check," MGK said on stage. "I became the first rapper to win Amateur Night at The Apollo. My first rap check was $45, and I never cashed it. I kept it forever.” Started from the bottom, now he’s a mainstream sellout.

INTERNET GOLD

five things I'm loving online right now

1	A pastry chef in Philadelphia has created a monster a corn dog doughnut. “It’s my birthday,” Carol Ha, who owns the bake shop Okie Dokie, wrote on Instagram. “So to celebrate I combined my two favorite things: hotdogs and donuts! (Legos and TMNT had already been done, apparently)” The sweet-savory dessert looks like a regular glazed but reportedly contains a hidden Sabrett hot dog. This may just be my post-July-4-barbecue brain talking, but it kind of… sounds good? Only one way to find out, I suppose.
2	Today in “nobody asked for this,” the restaurant chain Outback Steakhouse released 8,000 NFTs. They’re cartoon baby onions, and, fine, I guess they’re pretty cute.
3	Cub. In. Tub.
4	Did you know that celebrities can have custom roses designed for them? Well, they can, and Vanity Fair just published a great profile of the guy who does it. Among the tidbits: JFK’s rose sucks, Martha Stewart rejected hers, and Barbra Streisand was so in love with hers that she put it on an album cover.
5	Uh, guys? It’s, uh, raining fish in San Francisco.

401(K)RITTER CONTRIBUTION

send me cute pictures of your pets, please

VIA ROY AND DONNA RODDEY

I’m willing to bet these deer, frequently spotted hanging out in the backyard of two Wisconsin Scholars, know a lot about stagflation.

See you next week.
 

 
P.S. Are you anxious about stagflation? Would you eat a corndog doughnut? How would you react if you saw anchovies falling from the sky? Share your favorite mashup by emailing me at julia@money.com or tweeting me at @SuperJulia.

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