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?
  • 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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