You’ve got a pot of gold, now what?

Written 2/15/2022 for the March issue of Jackson Living Magazine:

Maybe you’ve recently retired, been saving for a while, just sold a business, settled a lawsuit, or even won the lottery. Now you have a pot of gold, how do you keep it? In the current economic environment, the question is more complicated than it seems. In fact, the question now for might be, How can one spend their gold in order to hold on to it? With $1 in 2020 being equivalent in purchasing power to $1.09 today, the dollar has had an average inflation rate of 4.23% creating a cumulative increase of 8.63% according to the latest CPI released by the U.S. Department of Labor in February. Certain categories contributed more than others over the past 12 months. For instance, prices of used vehicles are up 41%, and home furniture for living rooms, kitchens, and bathrooms has climbed 19.9% since just one year ago. So, what does this mean? If someone made a home improvement or transportation investment in 2020, instead of now, they could have saved thousands of dollars over today’s prices. Another consideration with the ongoing cost of inflation is that if one does not spend money in some way, investment or otherwise, they may be gradually letting their pot of gold slip away. For instance, if a family had a modest $23,000.00 sitting in a basic savings account earning a national average of 0.07% from 2020 until now, they would have lost roughly $2000.00 in overall buying power with very little to show for it besides perhaps $32 in interest.

I’m not advocating a buying spree; some prices may go back to “normal” after all. I simply want to share another perspective. With talk about the Fed hiking the Prime rate this year to combat inflation, it may warrant more thought to paying off or refinancing variable interest rate products like home equity lines or credit cards that may put someone behind down the road. ?If you don’t expect prices to fall anytime soon, maybe consider that investment in yourself or your family now. There have always been questions like: Is it better to lease or to buy? Should someone pay off the mortgage now or later? What should people be spending their money on for the greatest return? The answer to all of those questions for me is always - it depends. There really is not any perfect path for holding on to a pot of gold, just as there is not just one option for finding one in the first place. The rainbow lands in a different place for everyone. As such, if you realize which purchases may help you to become more productive, you may uncover the right options for you in those situations. In spite of inflation, the most important thing to consider is your productivity in society and that of your money. The risk is always yours as a purchaser, not the product or investment money may be freed to support.

Like a water current, currency was made to move and be put to work as a tool or resource rather than an object or prize to be won. There is a lot of water in the Dead Sea, but only microorganisms can live in it. Contrast that with the Amazon River which produces life and abundance for miles around. Which more closely resembles your spending or holding strategy? Is there a large purchase you have been holding off on while building savings? Have you been paying off non-productive debt while also investing? High inflation can erode savings, but at the same time, spending on personal assets can always appreciate in value over time. What is your focus? It is important to look at both sides of the golden coin so to speak. I wish for you that pot o’ gold, and all the joy your heart can hold.

2/15/2022

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Articles cannot and do not contain financial advice. The finance information is provided for general informational and educational purposes only and is not a substitute for professional advice. Accordingly, before taking any actions based upon such information, I encourage you to consult with the appropriate professionals. I do not provide any kind of finance advice. THE USE OR RELIANCE OF ANY INFORMATION CONTAINED IN POSTED ARTICLES IS SOLELY AT YOUR OWN RISK.

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