Living with feisty inflation

July 16, 2008
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You might have seen the startling news this morning about inflation. The cost of living exploded by 1.1 percent in June, which is a sobering annual rate above 13 percent.

One of the Indianapolis areaâ??s leading financial planners says itâ??s time to take action.

Grace Worley, who calls the June rate a â??horrific numberâ?? when taken in isolation, has been warning clients to expect an erosion in the American standard of living. Expanding economies around the globe will continue bidding up prices for oil and other commodities, meaning robust inflation has become a fact of life at a time when incomes arenâ??t increasing very quickly.

What to do? Keep plenty of cash on hand and take on no more debt than can be managed under most circumstances, she advises. And squirrel away money in diverse, global investments.

â??Thatâ??s all that a prudent person can do in an uncertain world,â?? she says.

One other thing.

Because rising inflation implies prices will be higher in the future, buy things now that youâ??ll need in a year or two. But only if you have the cash to do so and actually will need them.

Your driveway is cracking and you have the money to fix it? Go ahead with the repair, Worley says, because the price of concrete and asphalt might climb. Donâ??t take out a loan, though, because interest rates will start rising next year, she predicts.

What do you think?
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  • Since coming out of school, I have bought a very modest place, less than 94K for a 1bedroom, saved as much as my paycheck would allow me too and only bought things that were essential. I've paid off my credit card, my place has appreciated up to 115K and my savings account is flowing.

    I don't understand how it can be so hard for people to save money. Quit using credit cards.(I only have one) and I make sure I pay for cash. If my car window cracks, I drive with it until I have cash to pay for it. It just takes common sense and people assesing what it a necessity to buy our pay for, vs a want.

    I say bring it on!
  • Oh and some are probablay thinking I'm making a lot, I'm making less than the median income of Indianapolis. Around 30K and I am 27
  • Good advice except that the majority of people who would benefit from this advice are already heavily in debt and have no cash.

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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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