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Is Inflation Rising, and Should I be Worried?


Is inflation rising, and should you be worried? In this week's Arista Advice we look at the big picture and provide insight on how to protect against it.

Full Transcript:

Hello, welcome to Arista Advice. Question of the week is: "Paul, is inflation rising, and do I need to be worried about it?"

The short answer, no, no, no! You don't to be worried about this in the short-term. The long answer, the Consumer Price Index, which is what everyone is talking about, is an index used as a proxy for inflation in consumer prices. It offers some answers.

In 2020, inflation dropped to an average of 1.4%, which was the lowest rate since 2015. By comparison, inflation sits around average 2.5% as of June of 2021. Currently, inflation is heating up because everyone has been in hibernation or lockdown mode, and their cash has been building because they couldn't go anywhere, and now they're using it and spending it. Overall, consumer prices jumped 5% in the month of May, but the year-to-date average is 2.5, still within the strike zone that the Federal Reserve is comfortable with and targeted to watch. Given how the economy shock of COVID-19 depressed prices, rising prices makes sense. Prices had to go up because COVID is weaning, and the cases are dropping. However, other variables, such as growing money supply and rising raw material costs, could be a factor in rising inflation in the short-term.

Most prices are just returning back to normal. Here's a chart that gives you a hundred years of inflation. Look where we are over to the far right. We are below the median average on a year-to-date number. Nothing to be worried about. The media is just messing with your psychs and your individual anxiety and your individual pocketbook. Put them aside and continue to live a great life. 

You'll also see in this chart "How is inflation measured?" Here are the eight measurements of inflation of the Consumer Price Index: food and beverage, housing, apparel, education, medical care, recreation, transportation, and other goods and services. These eight main ingredients make up the Consumer Price Index. 

Let's not let the media get into our mind and underneath our skin and take away our peace and calm that we should all have because we do have financial plans. How is your money managed?  Our portfolios are built to absorb and to get through an inflationary period. They've seen it before, and we'll see it again, and we're currently seeing it now. 

Remember, we are returning to normal. Please remember to go to AristaWealth.com to get other videos, tools, tips, and resources to help you build a life of significance, and don't forget to subscribe, rate, and review.