Most economists are predicting that inflation is on the horizon because of wild government spending and policy coming out of Washington DC. This will probably mean higher interest rates and stagflation, slow growth with inflation. We are likely to see gasoline at $5 a gallon by year end, which will raise the cost of everything. So now is the time to plan for inflation in your budget.
If you have a low fixed rate mortgage, whether interest only or fully amortized, you are set. If you have a variable mortgage interest rate, it is probably the time to lock in at the low fixed rates offered today because those rates will be going up. If you are planning on buying a car that will require financing, do it now to get the low rates available in the marketplace; because interest rates are likely to be higher next year.
If we see slower growth, there is a good chance that the stock market will fall particularly if significant tax increases come out of Washington DC that will probably be effective January, 2022. Could be time to lock in some of your gains by selling now and getting into safer investments.
The housing market is so crazy right now that homes are selling for more than list price in many areas. As someone who has lived and worked through many real estate cycles, all of this scares me. It is a great time to sell a home; but not such a good time to be buying one. Though inflation should mean even higher home prices, they will be mitigated by higher interest rates, so we may be at the peak for this cycle. If you will be in your home for 5 years or more probably not an issue; but if you should have to sell sooner than that you could suffer a loss, so be careful.
Inflation is coming. A little planning now will make it a easier on the budget. So, do your homework and do the what if's to best position yourself financially for the years ahead.
