"Keep calm and carry on" is my new inflation motto

December 1, 2021 • Issue #122

Hi y’all —

Have you ever heard the phrase “looking out for No. 1”? It’s a tongue-in-cheek way to refer to prioritizing your own needs. According to Merriam-Webster, looking out for No. 1 is “to think primarily about oneself and do what helps one most.” According to Urban Dictionary, you must “watch yourself and no one else — there is only one person that’s gotta get through life with you ... YOU!”

Anyway, I say it mostly sarcastically:

“I’m looking out for No. 1 by buying this $35 ticket to see Jesse McCartney.”

“Yes, I will make that medium fry a large. I’m lookin’ out for No. 1.”

“Time for a nap! Gotta look out for No. 1!”

It’s a nice philosophy, but it also means that I tend to view most news events through a Julia-first lens. Take inflation, for example. I keep reading about how the consumer price index has increased 6.2% since last year, but (sorry) I don’t really care about the aggregate. All I want to know is what it means for me — what I need to do in order to stay on track financially in my own life.

In the spirit of looking out for No. 1, what steps can I take to protect my wallet from inflation?

I called Rob Williams, the managing director of financial planning, retirement income and wealth management at Schwab, for help. He told me that because of the media attention around inflation, “we’re all pretty hyper-focused on what we see in the news and tweets and things.” Younger investors are probably not used to these sorts of headlines, but inflation is normal.

In fact, inflation can be a good thing. Williams said it’s a sign the economy is bouncing back from the pandemic. The key is to not overreact.

“We don't think people need to make major lifestyle adjustments,” says Brooke V. May, managing partner at Evans May Wealth in Carmel, Indiana (which, ahem, ranked second on Money’s Best Places to Live list this year). “It's more important right now to try and tweak some of the areas in our budget to stay in line.”

As a baseline, May likes to recommend the 50-30-20 rule. Every paycheck, I should endeavor to put 50% towards essential living expenses, 30% towards discretionary spending and 20% towards savings.

From there, I may want to consider cutting back in certain, extra-inflation-prone areas of my budget. May pointed out that although the CPI is at 6.2%, core inflation — without energy and food — is just 4.6%.

To trim my energy-related spending, I can try driving less, perhaps by consolidating my errands or working remotely instead of commuting into the office, and using apps like GasBuddy to find stations with low fuel prices. I can turn down the heat so as not to incur higher-than-normal gas bills. I might even want to look into getting an electric vehicle or hybrid car.

For food, May said I can sidestep expensive restaurant bills by eating in more. When I’m at the grocery store, I can switch to cheaper brands and buy products in bulk. I may want to avoid categories that are seeing particularly high inflation rates. The prices of beef, veal, bacon and pork chops are all spiking, so I should adjust my shopping list accordingly.

“Being conscious of what you’re putting in your cart” is crucial, May says.

Also important is making sure I have my retirement savings strategy in order. My company offers a 401(k) and matches my contributions; Williams told me to take advantage of both. If I have retirement contributions withheld from my paycheck before I get it, I’ll never miss the money.

“You’re going to get that back someday,” Williams adds. “You’ll thank yourself in 20 years.”

I can benefit from that long time horizon by investing in a diversified portfolio of stocks. Williams said an easy place to begin is with a mutual fund or exchange traded fund that invests in the S&P 500, an index that tracks the performance of 500 top American companies.

“Start with general, diversified U.S. stock mutual funds, and pay yourself first,” he says. “Over time, your assets will grow, keep pace with inflation and hopefully beat it.”

Brittney Castro, a certified financial planner with Mint, also urged me to invest in assets that are going to produce solid returns. Interest rates on checking accounts are pitiful, and high-yield savings accounts aren’t high-yield these days, so “keeping too much in cash is no bueno,” she says.

Castro said now may be the time to learn about how to invest in real estate or crypto — “things that can potentially double your money faster.” I could even outsource to a robo-advisor.

Given that it’s the end of the year, it also may be a chance to review my income and figure out a way to grow my wealth in 2022.

“How can you increase your income next year? How can you increase your skill set or mindset? Can you ask for a raise or promotion? Maybe you keep your job as is and create a side hustle,” she adds. “It’s not always about, ‘oh, let’s cut back.’”

THE BOTTOM LINE

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

I should not freak out about inflation, but there are a handful of things I can do to hedge my wallet against it. Reviewing my budget, trimming my spending in specific categories, continuing to save for retirement and investing are all good ideas.

I can read the headlines, but I should stay the course and stick to my plan of looking out for No. 1.

“This isn’t the time to say, ‘I’m going to drop out of the economy,’” Williams says.

VIA GIPHY

RECEIPT OF THE WEEK

check out this wild celebrity purchase

VIA INSTAGRAM

Socialite/businesswoman/chef Paris Hilton got married a few weeks ago… and then promptly went on a honeymoon. With her parents. Hilton’s mom, dad, sister-in-law, niece and brothers all tagged along with her and husband Carter Reum to Bora Bora, where they stayed at Conrad Bora Bora Nui Resort — a hotel where rooms start at $800 and reach up to $5,624 a night. That’s hot.

INTERNET GOLD

five things I'm loving online right now

1	You guys. We’ve been over this. Please stop using “123456” as your password! You too, “justinbieber” and “pokemon” people.
2	Tearjerker alert: This video of Adele being surprised by her former English teacher — a woman who influenced her life and changed the course of her career — will make you sob because of how wholesome it is. The teacher cries, Adele cries, I cried, you’ll cry. Grab your tissues and press play.
3	Kind of obsessed with Kristen Dunst’s friend group’s code word for awards: shrimps. “You go, ‘This movie’s pretty shrimpy,’ or like, ‘We deserve some shrimps for this,’” she told the Associated Press. “It’s fun.”
4	Did you guys know that the French president is allowed to just… change the color of blue it uses on the flag? Apparently Emmanuel Macron has recently tweaked the hue to more of a navy in honor of the French Revolution. ALSO, apparently not everyone likes it, with some people in the palace saying it’s ugly. J'aime le drame!
5	Pig on firetruck.

401(K)9 CONTRIBUTION

send me cute pictures of your pets, please

VIA RYAN FERGUSON

Meet Bella, a fiercely loyal pup who sees the current inflation situation as the ultimutt opportunity to adjust her kibble budget.

See you next week.
 

 
P.S. I've been bad at including Scholar feedback lately, BUT I want to put together a list of your absolute BEST money advice for the holidays. Send me your favorite finance tip, and you may be featured!

P.P.S. Are you changing any of your spending/saving strategies in light of inflation? Would you take your parents on your honeymoon? Which country has the coolest flag? HMU at julia.glum@money.com or @SuperJulia on Twitter.

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