Inflation has been of little concern to investors for over a decade. As the pandemic seems to be ending, the global economy will open up in the near future. Consider protecting your investment portfolio from inflation.
1. Why does inflation matter to your financial plan?
Prices go up over time. Invest in assets that have the potential to counteract the effects of inflation. For example, if the annual inflation rate is supposed to be 2% then build a portfolio that has the potential to return at least 2%.
2. What can you do?
Evaluate your portfolio to make sure you have a combination of investments to provide a return to keep up with inflation. Investments will vary based on your age and employment status. A younger investor may not need to add additional inflation risk in their portfolio with 40+ years until retirement. However, a retiree with a conservative investment mix may be susceptible to a higher inflation risk.
3. Look out for inflation surprises
Some inflation is normal and means the economy is growing. Be aware though that inflation doesn’t always behave as expected. Having a plan in case things don’t go as expected is key.
4. Inflation periods can be challenging
A challenging aspect of inflation is that funds that do well during high inflation do not typically do well most of the time. One example is gold. While gold has historically kept up with inflation, it doesn't offer compounding returns and the price can be relatively flat for long stretches of time. "One of the lessons here may be that, during normal times, investors may want to limit that portion of their portfolios dedicated to inflation hedges (like gold), given the high opportunity cost of reduced investment in assets that compound over time. But when conditions go extreme—meaning high inflation or hyperinflation—no matter how big one's hedge is, it will seem not nearly enough, at least in my experience," says Jurrien Timmer, director of global macro at Fidelity.
5. Be proactive!
Just like other economic risks, investors need to plan for inflation. Making sure your portfolio is an investment mix considering your age until retirement and financial situation is important. While you can’t avoid inflation, taking these steps will help you keep to your financial goals. For more details, visit Full Fidelity Article or contact Brien at Brien@traditionswealthadvisors.com or 979-694-9100.
If you have fought with your spouse over money, then you probably know that money is one of the top stress factors in a relationship. In fact, disagreements over money are the second leading cause of divorce. Unlike other aspects of a relationship, however, money provides a very real, tangible, and all too limited resource over which problems with communication can erupt into full-blown disasters. But when you and your spouse are on the same page about money, amazing things can happen!
Talk It Out (and Be Honest)
Many feel this financial infidelity is as bad or worse than physical infidelity! Financial secrets are like ticking time bombs waiting to destroy your relationship. But it isn’t always as sinister as a hidden credit card. Sometimes it’s simply a willful ignorance on the part of you or your spouse, unwilling to ask questions about the other person’s financial accounts or spending habits for fear of conflict. Take the time to sit down with your spouse and lay all your cards on the table. What's your salary? What benefits do you get? What investments have you made? Don’t forget to share those bad things too…like the balance on your credit card! While you probably know some of these things about one another, without complete and utter transparency, the ‘money issue’ will always be lurking in the background.
Establish Your Roles
People can get sticky about finances, especially when it comes time to decide who pays for what. Long story short, there’s no right answer here. Roughly a third of Americans split their bills evenly amongst partner’s salaries, while around fifty percent of households, one spouse or the others pays the household bills exclusively. The most important thing to do is, again, talk about it. Do you split the bills proportionately based on how much money you each make, or does one income go to bills and the other towards savings? Will one of you be the person who acts as the household ‘banker’ (paying the bills, monitoring savings and investments, etc.), or will you sit down once a month to review your finances as a couple? Do you split the bills proportionately based on how much money you each make, or does one income go to bills and the other towards savings? Will one of you be the person who acts as the household ‘banker’ (paying the bills, monitoring savings and investments, etc.), or will you sit down once a month to review your finances as a couple? How much money will you budget for your bills, your savings, entertainment, new clothes, etc.? How much wiggle room will you have every month in your budget, in case expenses you didn't expect come up? How much money will you budget for your bills, your savings, entertainment, new clothes, etc.? How much wiggle room will you have every month in your budget, in case expenses you didn't expect come up? In order to merge your financial lives, it's important for you to realize that you have to work as a team. Even if you ‘get’ finances and your spouse doesn’t, that doesn’t give you all the power. It means you have the responsibility to communicate what’s going on!
Create Joint Accounts
Do you trust your spouse? Hopefully, ‘yes’! While there’s nothing wrong with keeping separate accounts, merging your money is an important part of establishing trust, especially if you’re married. Extending that trust to your spouse can go a long way toward merging your financial lives. Why do you fight with your spouse about money? The answer probably lies in how you communicate. Luckily, it doesn’t have to be that way. Sit down together, decide on roles together, and come to an agreement. Together. No matter how uncomfortable it might feel at the time, it will be worth it!
Would you like to talk to someone about your money disagreements? Reach out to Traditions Wealth Advisors for guidance at Brien@traditionswealthadvisors.com or 979-694-9100.