This is an article I wrote for the Tennessee Convention of States. I’ll post the published version once it’s available.
For months, we have been in one of the world’s great pandemics. And while it has been tragic to many families and has affected all of our lives at some capacity, Covid will pale in comparison to the financial pandemic that is unfolding right before our very eyes.
As a financial advisor, I work every day with people to be in position to take advantage of inflation instead of being hurt by it regarding their financial lives. As an American, I am appalled at what things cost now and I, like you, am becoming more concerned where all this is leading. You should be as well.
Inflation is affecting our lives in all areas – the cost of food, our bills, our ability to buy goods and services that we need in a timely matter, and a multitude of other ways. Take college tuition for example. Kids today are paying in one year what it cost for me to complete my degree in five years at a private college. Consider healthcare, costs of automobiles, the cost of clothing, and so on. Has your paycheck gone up accordingly? No.
Newsweek put out an article around the week of July 4th of this year. The article’s headline was that inflationary rate was around 5.6 percent in the past 12 months. According to the Social Security Administration, the 2021 cost of living adjustment was a measly 1.3%, a mere $20 per month (or so) raise for the average person on Social Security. (As a side note, have you ever noticed how they raise Part B of Medicare to absorb whatever the raise in cost of living is?)
Before I explain what the REAL inflationary rate is most likely, let’s have brief history lesson first. Beginning in the 1990s, President Clinton and Alan Greenspan omitted food and energy from the government’s inflationary rate, most likely to keep people from panicking but more specifically to keep cost of living adjustments to Social Security down. So, we know that the numbers we hear from our government are not true. We feel something totally different when we go to the store or go online to purchase something.
In order to figure out what the effect is on our dollars’ buying power, let’s measure the previous numbers against another government entity – the U.S. Postal Service. I was born in 1965. A first-class stamp cost. $.05. Today, those same stamps cost $.55. So that’s a 4.38 percent increase over 56 years. So, ask yourself this question: Is the US Postal Service making money, or are they losing billions of dollars every year? They are losing money bigtime.
In light of this, one could safely argue that inflation is most likely around 7 percent. Using the Rule of 72 – how many times does 7 go into 72? 10 times. That means this: Every 10 years the cost of living will DOUBLE. Therefore, if you need $50,000 to live on today, in 10 years you will need $100,000 and in 20 years you will need $200,000. Now, if you were going to invest a large sum of money over a long period of time, what kind of interest rate do you think you could get? Let’s be generous and say 4 percent. Now, take your calculator and take $200,000 and divide it by .04. Does your calculator say $5,000,000? Do you get it now? How likely will you be able to save that much, and even if you have it, do you want to spend it all just to live?
With every dollar our government prints and with every dollar they spend foolishly, they are making matters much worse for all of us. Go to www.usdebtclock.org and make sure you’re sitting down when you look at it.
Now that you see the problem, what can you do about it? I suggest the following: 1) Join the Convention of States, 2) volunteer at whatever capacity you can afford, 3) write your representatives in Washington on a consistent basis, 4) Tell your circle of friends and family to do the same. And – please get with a financial advisor who really knows what they’re doing.
The storm is quickly approaching, and the time is now. It is time for us all to stand as one and be heard and fight for your future generations so they can financially withstand the erosion of our freedom, the steady abandonment of our values, and be able to survive the financial pandemic when it hits.
The Convention of States can help you do this and more. Get involved.