The Good & Bad Of Inflation & What To Do About It On ‘How To Money’


Many economists are worried about the rate of inflation coming out of the pandemic lockdowns, so Matt and Joel decide to tackle inflation on this episode of How To Money, explaining what it is exactly, why (and why not) to be concerned, and what we can do on an individual level to prepare for it. Inflation was a big topic in the 1970s and ‘80s, when it topped 10%, but for over ten years it’s been sitting at around 1.5% – negligible enough that most of us don’t even notice it. A steady inflation rate is a sign of a healthy economy, because while it raises prices for goods and services, it also causes wages to rise in response. However, if inflation rates spike, that’s no good for anyone. The government will usually respond by lowering federal interest rates – as they did when the pandemic hit – which means we have great rates for borrowing money right now, but dismal returns on our savings. But what can we do with our own finances to keep the ramifications of inflation from affecting our bank account too much?

First, Matt and Joel stress the importance of investing our money. Investments are protected from inflation in ways that cash just isn’t, so if you’re stuffing money under a mattress or keeping it in your checking account, you could feel the effects of inflation a lot more than someone who’s putting most of their money in the stock market. They suggest a few stocks that are specifically protected against inflation, but you don’t have to go for those exclusively – the best protection is heavy investment in stocks, period. It might hurt at first to put money aside in an investment account, but “wealth generation is the inevitable consequence of investing,” so that money will grow while you watch. So the sooner you start investing, the better! 

They also recommend getting on a budget and/or adapting your current budget accordingly. If you’re trying to live on the same budget you had in 2011, inflation is probably making that extra difficult: Everything from car payments to craft beer has gone up in price in the last ten years. This doesn’t mean you have to raise every category in your budget by 2% to keep up with the inflation rate, but it does mean taking a hard look at the numbers to determine the areas where you go over budget most frequently, and making realistic adjustments. “Having a budget that works for the reality of the prices that exist is really important,” Matt says. Plus, what about investing in housing, or gold, as a hedge against inflation? It might not be as safe as you think. Hear all this great information and so much more on this episode of How To Money.

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