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  • Bridget Sullivan Mermel CFP(R) CPA

Inflation = Opportunity | Take Action | Save Money!



Inflation= Opportunity. There are upsides to inflation. Sure, inflation increases uncertainty and that makes people feel bad. But we're going to flip the script.


We’ve got 3 ways to take advantage of inflation. In this video we’ll talk about how you can take the focus away from “I feel bad,” and switch the focus to “I’m making best use of the situation.” You’ll learn how to act on the things you can control.


First tip: travel overseas. The dollar is high and other currencies are low. It’s like Europe is on sale. Thinking about traveling to a country close to the Ukraine? That’s probably even cheaper! The euro and the dollar about even now. It’s a great time to travel to Europe. Cruises are totally on sale.


A lot of times the smart money is on what everyone doesn’t feel like doing now.


Second Tip: Buy where inventories—retailers have more inventories on certain items. Check out sales on patio furniture, fridges, cell phones, and TVs. It’s a good time to buy if you need these items.


Our final idea comes from macroeconomics. In certain industries there is a higher cost changing prices than in other industries. In some industries it can take time to change prices. For instance, health care is negotiated with health insurance companies and tied to specific prices. Because of that, it’s more difficult for health care companies to raise their prices. Insurance companies are in some situations regulated and need to have approval to raise their prices.


Bonus item—where to invest in inflationary times. We love I Bonds!


We've been talking about I bonds for quite some time. Here are videos we've made about them.


John first described the basics about these savings bonds when they were making 3.5%: https://youtu.be/72xcJH3CZsM


We called on Linda Stratton, an advisor who has been using them since 2005, to help us understand more of the ins and outs in this video: https://youtu.be/AYr_7L6OaCs


Linda Stratton joined us again to discuss gifting I Bonds to children, and I Bonds versus 529 plans: https://youtu.be/KCOmYjZhUGM


The last time rates were going up, we did a granular dive into how the interest rate works on series I Bonds: https://youtu.be/A0FHc-9syaU


This video sums it up with the recent rates: https://www.youtube.com/watch?v=0V3EFkwo-Z0&t=3s


#ACPMemberWisdom#inflationtips


00:00 Welcome!

00:56 No. 1 Travel on Sale

03:04 Inventory Overstocks

03:51 Prices That Don’t Rise Fast

05:09 Bonus: Our favorite place to invest during inflationary times—I Bonds


What’s your feedback? What have you considered? Let us know in the comments!


John's firm website: https://www.trinfin.com


For advisors around the US: https://www.acplanners.org/home


Thanks for watching and please subscribe!


TRANSCRIPT:


Bridget: People don't like inflation. I don't like it. It makes me feel out of control. I don't know what to expect. There's this uncertainty that makes me feel bad. In today's episode of Friends Talk Financial Planning, we're going to flip the script and talk about three ways—with one bonus topic—that you can actually take advantage of inflation. Here are some good ways to stop feeling so uncertain by focusing on what you can control: your actions. Hi, I'm Bridget Sullivan Mermel, and I have a fee-only financial planning practice in Chicago, Illinois.


John: And I'm John Scherer. I have a fee-only financial planning practice in Middleton, Wisconsin. And before we start talking about how to approach inflation, I want to remind everybody to hit that subscribe button. That helps other people find this content on YouTube. And with that, let's get into talking about inflation. It's a scary thing. I love to talk about this topic. When facing inflation, many people think, “What's going on?” But there are some real ways that we can take advantage of inflation. What's the top thing on your list that you want to talk about?


Bridget: The top thing for me is travel overseas. Now, sometimes people are afraid of it because they're hearing about lines in the airports, et cetera. But right now, the dollar is high, which means that other currencies are low. It's like Europe is on sale.


John: Yeah.


Bridget: And if I were a traveler, going to somewhere like Helsinki, or something that in the American imagination seems very close to the Ukraine, is probably a good deal.


John: Yeah. It's interesting when I was over in Europe a long time ago now—ten or so years ago—I was buying some drinks and it was $15 for a drink. And I thought, “Oh, $15, that's a lot of money. Wait a minute, that's in Euro.” So it was 50% more than that, something like $22 for a drink. But now the Euro and the dollar are just about even as we're recording this. And so, it's almost as if it's 50% cheaper to buy that same drink at that historical place. So that sort of thing for people that have been thinking, “Hey, this is a trip that I'd like to take.” This is one of those big things. It's effectively on sale right now with the way things are going.


Bridget: Yeah, good point. And cruises are totally on sale. A lot of times the smart money is on what everybody else doesn't feel like doing. Cruises got a bad rap during the Covid crisis, so people aren't thinking cruise, but it's a great time to take a cruise. The prices are down.


John: It's interesting talking about things being on sale and you don't often think of travel being on sale, but it sort of is with what we're talking about with the dollar. One of the other things is some inventories. We had that downturn with inventories, shortages of things. Now a lot of the retailers have a lot more inventories on certain items, so keep an eye on those in the coming months in case they go on sale.


Bridget: Yes. And we've got a list. We've got patio furniture, fridges maybe, but definitely cell phones and televisions. Prices are going down on those things, so it's time to buy those.


John: Right. So be thinking about some of those upgrades. Some of those things that a year or two ago were hard to find you might be able to find for much cheaper, so take advantage and be aware of some of these things that might be on sale coming in the future.


Bridget: Yeah. And another idea is one that I learned in my economics class way back in yesteryear. The professor was talking about menu prices or something like that. There's some cost to changing prices on things and there's some time frame on changing prices on things. And so, anything you want to buy that takes a while to change the price on it, is going to be a better deal now. What types of things fall into that category? It's not going to be something that you just scan, and the price is what the price is.


John: You go to the car dealership. It's really easy to put a new sticker on and there's the new price.


Bridget: And then they charge you more.


John: That's really adjustable. What things are you talking about?


Bridget: Think about health care. They might even have regulators that they have to deal with. It would take a while to work through the system. And obviously you want to look at how much does your insurance cover, all those types of things. But it's harder for the healthcare industry to raise the prices.


John: Yeah, that's interesting. So maybe we're talking about some elective procedures, some of those things that we don't need to have. And, of course, there's these wait times that you have to think about, but maybe this is a time to start thinking about some of those things and taking advantage of this inflationary cycle.


Bridget: Right. So we've just talked about all the ways you can spend money. Now we've got a bonus item about where to invest in inflationary times. Our favorite investments for inflation are I bonds. So if you haven't heard about these yet, you can put $10,000 in a guaranteed account. Right now, it's earning 9.62% a year, and it seems like it's going up in November, too. I bet anything it’s going to go up higher than that. And it's guaranteed by the government. You got to keep the money in for a year, but then after that, you're good to go. You can take the money back out. You, however, have to buy this through Treasury Direct, so there are old I bonds that are basically saving bonds. The max you can put in this $10,000.


John: Yeah. And it's one of these things that I think about on the show, and then I sit and listen to it again and think, oh, we're getting 9% guaranteed return. It's safe, guaranteed for a short period of time—not long time, but for the next six months. And it feels like, wow, that sounds too good to be true. Tax deferred earnings. Most of the time when something sounds too good to be true, it is. This might be the one exception.


You might be thinking, “Golly, are you sure this is right?” Yeah, this is the right thing. And it's that one place where it’s true. Where else do you find something where it's too good to be true, and it actually is true? This is that thing. This is where those I bonds fall today. The drawback, as you said, is that you can only do a certain amount. You can't put all your money into I bonds. That would be a great place to be dependent on a person's circumstances, but for taking advantage of those little bits and pieces of our extra savings money it is a complete no brainer to have I bonds.


Bridget: Yes, if you can set it up for a year, as long as you know you don't need it for a year, but then after a year, you're set. And so, if you put in $10,000 now, and then you put in $10,000 next year, then you can kind of segment it out so that you will have some available money if you need to take it out. But most people just kind of want to keep it in, especially at these interest rates that keep going up, along with the inflation rate. The other thing about I bonds that people don't understand, is that it's a savings bond that is designed by the government to help the masses with inflation fears. And so that's the whole point of it. It is not market driven. It's not like the Fed does blah blah. It's not based on market forces, it's based on law. And so that's why the market forces right now are not paying 9.62 interest, but I bonds are.


John: Right.


Bridget: And I bonds is the one sweet spot for inflation.


John: It's a great place to circle back and wrap things up. We talked about three places where you can take advantage of these inflationary times. One with travel overseas, another one with items that might be on sale and overstocked in inventories—like patio furniture and television, cell phones—and then things where it's really difficult to change prices quickly, like things in the insurance industry, the health care, those sorts of things. But I'll tell you, I love the feedback that we'll get from people in some of the comments. I'm really interested in hearing what your ideas are as a viewer. What sorts of things have you considered?


Maybe you've taken advantage of some of these things already. Maybe there are some other ways that this conversation can help engage. Drop a comment in the comment box. Let's use our community to learn from one another in addition to the things that Bridget and I talk with our clients all the time. What other ideas are out there? And I'm sure that we're going to learn some things from that. So drop a comment in the comment box and let us know what's going on. That could be really interesting. Maybe there'll be some future episodes where we can talk about some of the things that everybody's sharing on this.


Bridget: Yeah, that's a great idea. With that, I'll wrap it up. I'm Bridget Sullivan Mermel, and I have a fee-only financial planning practice in Chicago, Illinois.


John: And I'm John Scherer, and I have a fee-only financial planning practice in Middleton, Wisconsin. Drop your comments. Let us know what you're doing to offset inflation and what ideas you have. Don't forget to hit that subscribe button to help other people find this great content. Both Bridget and I are members of the Alliance of Comprehensive Planners. If you like what you hear on our show and would like to find somebody that thinks in a similar fashion to us, visit acplaners.org to find an advisor near you. And with that, until next time.


At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.



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