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October’s Inflation Surge: What It Means for Your Wallet

Jean Chatzky  |  November 16, 2021

Plus: The truth about buy now, pay later.

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This Week In Your Wallet: Jobs, Gas Prices, Wireless and The 4% Rule

Let me just put it out there. We are hiring at HerMoney. More accurately, I am hiring. I’m looking for a new social media person who can double as my assistant. Someone right out of college is fine, but experience is great as well. It’s full time. And I’d prefer someone near or in Philly. For the record, people who’ve had this job before have gone on to great things at Forbes, NerdWallet, JP Morgan, Morning Brew and more. If you know someone (or if you’re interested yourself) send me your resume and a cover letter at jean@jeanchatzky.com. But let me just say…I’m having a heck of a time.

And I’m not the only one. The country added 531,000 jobs in October, beating predictions.  And yet, that’s just a shadow of the 4.4 million people who left their jobs in September. With 10 million jobs still open, the puzzle and the pieces don’t seem to be lining up. How does it all shake out? Hopefully, with more flexibility and higher wages for workers, and with a new definition of work-life balance. We’ll have to wait and see. In the meantime, I’m waiting to hear from you!

The Price At The Pump

Gas prices – and, admittedly, hostages – cost Jimmy Carter the presidency. Will they do the same for Joe Biden? As NPR reports, gas prices are at a 7-year high. Maybe you realized that. Or maybe you just realized that they are a lot more expensive than they were a year ago. I know I did when filling up in New Jersey recently. New Jersey, mind you, is where even though you aren’t allowed to pump your own gas, prices are notoriously cheap – but I was shocked to watch the meter tick up to $45 to fill up my small wagon. (Note: It takes regular!)

Did I notice it when I paid an extra 50 cents for milk? Or $1 more for bacon? Or, more for so many other things as the October inflation reading came in higher than we’ve seen in three decades. I’ll admit it, I did not. But gas prices are so in your face. They are screaming at you from much-traveled street corners. You have to watch as the price ticks up. It’s as if Drew Carey is standing there, with the yodeling music running, waiting for the alpine  climber to topple over the cliff. 

Senator Chuck Schumer (and 11 Senate Democrats) are angling for Biden to tape the Strategic Petroleum Reserve that the US maintains in, as Yahoo News notes, “a series of caverns on the Texas and Louisiana coasts.”  Energy Secretary Jennifer Granholm says there’s no guarantee that will happen. So, what’s the alternative? 

It all comes back to this: Control what you can control. If you can’t control the price at the pump (and here are some tips to pay less on gas and 9 other products with inflated prices) try to control the amount you drive. Group your errands. Walk if you can. Look to public transportation. And look for other ways to save. For one, stop spending money just because you’re bored.  And revisit those monthly bills…

For Example, Your Cellphone Plan

This piece from Kiplinger noting that a family of four can save more than $900 a year by switching carriers caught my eye. For years, it was tough to find unlimited data at a decent price. That’s not the case anymore. You just have to a) know how much data you’re likely to use and b) decide which options you need  — 5G? Mobile hotspot? —  along with that data. And if you don’t need unlimited data, there are even more choices (at lower prices) available to you. One more good tip: Signing up for auto payments and going paperless can save $5 to $10 a month per line – that’s a big savings if you have a family plan.  

Should You BNPL?

This holiday season, buy now pay later (BNPL) – the option that you’re being offered pretty much everywhere to spread one payment out into several interest free installments  typically over a four-to-six weeks– is expected to account for 3% of all purchases, up from 1.3% last year writes Herb Weisbaum for Consumers Checkbook. You can understand why. It allows people on a two-week paycheck cycle to bring in two to three more checks, which gives even those on a tight budget a little more float.

But here’s the thing – it only works if you stick to the rules. 7 in 10 people don’t – and end up paying late fees or interest, according to a new study from Lending Tree. So what do you need to know? How much late fees are likely to be if you miss a payment. What the interest rate is going to be if you miss a payment, or need to stretch your payments out over a longer period of time.  And, if you’re better off using a credit card. (If you pay your card off monthly and get points or miles, the answer is likely yes.)  Finally, be aware that two-thirds of shoppers cop to the fact that having this option causes them to spend more than they would have otherwise. Just sayin’.

The 4% Rule Gets A Haircut

Finally, let’s revisit the 4% rule – which, for years now, has been the default hack for making your retirement funds go the distance. A new report from Morningstar says not so fast. In fact, the research suggests spending no more than 3.3% in your first year of retirement and applying an inflation adjustment to that initial withdrawal in subsequent years. The Wall Street Journal’s Anne Tergesen gave this helpful example: “Someone with a $1 million portfolio would spend $33,000 in the first year of retirement. Assuming 4% inflation, the investor would increase annual income to $34,320 in year two and $35,690 in year three, regardless of the market’s performance.”  

Why the change? Because markets have been rising at such a fast clip are projected to slow their roll in the years to come. “It’s counterintuitive, but when the stock market and stock valuations are high, it’s the worst time to retire,” said Morningstar personal finance director Christine Benz, a co-author of the firm’s report.  The story, which offers a few other ways to apply this new logic, is worth a read.  

Have a great week,

Jean 

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