You remember inflation, don't you? If you were an adult in the mid-1870s and early 1980s, you learned to deal with it in your everyday decisions.
Guess what? It's time to dust off those skills you developed back then. Most people believe inflation is back in a major way and not just for a "transitory" time period. Consumers are having to deal with the ravages of this silent "tax" on their financial resources. For many adults this is their first introduction to real inflation and how it impacts money decisions.
In my view, if, as a society, we decide to raise operating costs by increasing employee compensation and increasing taxes on a portion of companies, you would expect cost increases to be passed along to consumers. Now you add to that taking actions to introduce a much more robust social safety net and migrating to a "green energy" economy, while adapting to the costs of the COVID -19 pandemic, you would expect prices to increase. It looks to me that a lot of these price increases are a permanent part of the costs of the goods and services we purchase.
Inflation is defined as the decline of your purchasing power over time. The rise in the general level of prices, often expressed as a percentage, means that the dollar buys less than it did in prior periods. In reality, the result of inflation is an increase in the cost of goods and services. To deal with the negative impact of inflation it comes down to whether incomes increase at the same rate as inflation does so that households can at least remain level with the changes in prices. Most of our incomes are not increasing to offset the large price rises we are experiencing. Inflation eats away at cash budgets and lifestyles because over time consumers need to pay more for what they need. All of this economic change has bewildered consumers who are experiencing significant inflation for the first time and are looking for answers on how to best deal with it. Inflation is a whole new dynamic impacting their financial lives.
Here are six actions that can be taken to offset the ravages of inflation on America's pocketbook:
1. Improve purchasing decisions.
With persistent inflation, delaying a purchase can be costly since the price is likely to rise in the future. For example, if you wait a year to buy the washer and dryer you need, they may increase 10% in price. You then may decide to make the purchase today to save money. The same can be said if you want to stock up on groceries when you see sales in the stores. Making better purchasing decisions can save households money and help maintain lifestyles despite increasing prices. A caution is that consumers may unwisely decide to dip into their emergency funds to make these purchases to save money.
2. Be a more intelligent shopper.
When I was a young adult the high inflation rates of the 1970s led to the birth of store brands or generic groceries. These were products that saved consumers money by forgoing specific branding or unneeded packaging. Today, one-way consumers can be better shoppers is by purchasing generic drugs and store brand foods. Looking for used merchandise versus new is another savings tip. During inflationary times you need to become a more intelligent shopper by looking for different ways to save money.
Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network, and managing director of Insurance Insight Group. He is also the author of the new book 
