Don’t let inflation deflate your plans

Return to budgeting basics: Start by reviewing your financial situation and looking at your cash flow. How much money is coming in versus going out? Have you segmented your spending in needs versus wants? What’s your confidence in savings versus debt?

If you’re feeling extra pain at the pump or taking a second look at your grocery bill these days, you’re not alone. The U.S. Bureau of Labor Statistics recently confirmed what we’ve all noticed — prices are on the rise.

The consumer price index rose 7.9% for the 12 months ending in February, the largest 12-month increase since the early 1980s, according to the U.S. Bureau of Labor Statistics — TED: The Economics Daily, https://www.bls.gov/opub/ ted/2022/consumer-pricesfor-food-up-7-9-percent-foryear-ended-february-2022. htm#:~:text=The%20 Consumer%20Price%20 Index%20rose,month%20 advance%20since%20 July%201981.

The pinch we’re experiencing in our wallets is real. How can we guard against these rising prices from upending our finances?

Here’s an overview from Thrivent on inflation and the steps you can take to hedge against its impact.

What is inflation?

Inflation is a persistent rise in the level of overall prices for common goods and services. One of the ways the government measures inflation is by tracking the consumer price index, which measures average prices for a “basket of consumer goods and services.”

In other words, a rising index doesn’t mean just paying more for a loaf of bread or even more for a week’s worth of groceries. It means you can’t buy as many goods and services in several areas for the same amount of money that you could previously. Because this can have a major impact on your budget, savings and investments, you’ll want to be intentional about keeping your financial plans on track.

What you can do to counteract the effects:

Return to budgeting basics: Start by reviewing your financial situation and looking at your cash flow. How much money is coming in versus going out? Have you segmented your spending in needs versus wants? What’s your confidence in savings versus debt? With this information, you can adopt or revise your budget to determine next steps, which could help you feel more in control of your overall financial picture.

Review your financial position: Despite the pressures of inflation, it’s important to make sure your financial fundamentals are in place. First, take steps to help strengthen your financial position with an emergency savings fund, a saving/spending plan and a debt management plan. Second, consider opening an insurance policy (or review your existing one) to make sure your income and assets are protected in case the unthinkable happens. Finally, stay on track with your long-term goals, including saving for retirement. If you’re close to retiring, be sure to account for potential future health care needs and related expenses.

Review your investment portfolio: Assess your risk tolerance and compare that to how your investments are allocated. A diversified portfolio that aligns with your risk tolerance, investment objectives and time horizon can potentially realign your investments to minimize the effect inflation has on the growth of your assets.

Consider your life stage: People feel the impacts of inflation but it may show up in different aspects of your financial situation based on your life stage. If you’re in the early stages of your career, while you may have time to hedge against the long-term impact, foundational elements like your savings rate or debt management may feel challenged. Prioritizing your financial goals and being intentional about things like your emergency fund and reducing debt can help you navigate life’s unexpected curveballs.

If you’re closer to retirement or are already retired, your biggest concern may be inflation’s impact on your retirement income and savings. While your Social Security benefits may have a cost-of-living adjustment, you may want to explore where, and how, you’re generating income. This could be a good time to connect with a financial advisor to evaluate other sources of stable income.

Assess your short- and long-term goals: Your financial goals are individualized because they reflect your personal values. Housing decisions, helping your children with college, managing long-term healthcare and preparing for retirement are all examples of individual aspirations. To deal with inflation, you may need to review and recalibrate your goals. Take a step back to identify what’s most important to you. Then reprioritize your expenses to help create more breathing room in your budget.

Regardless of where you are on your financial journey, it’s important to seek guidance from a financial advisor who can help assess how inflation will affect you. By taking time to implement the steps outlined above, you’ll experience greater financial clarity and have more confidence when making financial decisions.

This article was prepared by Thrivent for use by local financial professionals Rebecca Wise, 610839-8955, and Bridgit Holly, 215-368-4888, in Boyertown; and John Lauer in Morgantown, 610-286-5986.

Thrivent is the marketing name for Thrivent Financial for Lutherans. Insurance products issued by Thrivent. Not available in all states. Securities and investment advisory services offered through Thrivent Investment Management Inc., a registered investment adviser, member FINRA and SIPC, and a subsidiary of Thrivent. Licensed agent/producer of Thrivent. Registered representative of Thrivent Investment Management, Inc. Advisory services available through investment adviser representatives only. Thrivent.com/disclosures.