Inflation Is at 3.8%. Are Are Three Ways to Make Your Money Fight Back.

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to qualify. Probability percentage is subject to decrease. I'm Nicole Lathen. The only financial expert you don't need a dictionary to understand. It's time for some money revenue. Last week we talked about how hard it is to be the Fed right now. The Fed is in charge with keeping inflation in check, but inflation is not behaving right now. The data on inflation shows that

it's at 3.8% right now, but we did not need that data or that report because we have all been feeling it already. You can not turn on the news or scroll Instagram without hearing about it, but yeah, I'm also going to bring it up too. Gas prices. Gas is averaging for a 50 agalination wide right now, and that is up from just under three bucks a few months ago. Or I'm at in LA. I just passed a gas station that was $6 and $4 and I did like a jump scare.

The point is inflation is back. And if you're not actively protecting your savings from it, your money is getting in a live. But there is good news here. There are places you can put your money that will help you fight back against inflation. But you know what, I'm going to start with

the bad news first. I can't help it. You can take the girl out of CNN, but you can't take

it out of the girl. So here's the bad news. The government's main inflation report is the Consumer Price Index or CPI. That latest report is what told us that inflation hit 3.8% for the 12 months

fast. We were at 2.4% as recently as February of this year. In just two months, inflation jumped a

“full percentage point. So here is what's driving it. Energy prices, surging nearly 18%”

year over year in April alone. Gasoline up 28%. Fuel oil is up 54%. Now we know why this is happening. The conflict in Iran has disrupted oil exports through the state of Hormuz, which is one of

the most critical choke points for global oil supply. But it is not just gas. It is eggs.

It's burgers. It's electricity. The BLS confirms what our receipts already told us. Food at home is up 0.7% in April alone. Beaves up 2.7% in a single month. I mean, if you're barbeguing this fourth of July, your grocery bill is going to be no joke. But even if the war were to end today, it's not like it's going to come down right away. It will take a beat for prices to come down. But meanwhile, we're out here dealing with 3.8% inflation right now. A 3.8% inflation rate

means that 100 bucks you had in January is only worth about $96 on 30 cents right now. All right. Here's the good news. There are ways to protect your money for the long haul. And I'm going to start with a personal favorite of mine, I bonds. I bonds are savings bonds issued by the US Treasury and they do something that no other safe investment does. The interest rate automatically adjusts every six months based on inflation. So when inflation

goes up, your rate goes up. It is literally designed for the environment we're living in right now.

It's dope, seriously. You never thought I'd say that about a bond. But it is, in fact, dope.

The current rate on I bonds is 4.26%. And it's going to say that way until the next adjustment at the end of October. That includes a fixed rate of 0.9% which is locked in for the life of the bond plus an inflation component of 3.36% that resets every six months. Here's an important part to know. That 0.9% fixed rate is your floor. So even if inflation eventually drops to 0%. You're still earning something. 0.9% is not a lot. I get that. But this isn't about growth strategy here.

It's about preservation strategy. You can buy up to $10,000 in I bonds per person per calendar year.

“Couples can do 20,000. You have to hold them for at least one year before redeeming.”

If you redeem though before 5 years you lose the last three months of interest which is a small penalty to pay. After 5 years they are completely liquid 0 penalty. So with that in mind, I bonds are best for money that you're not going to need for at least a year. Part of your emergency fund or long-term savings. They're not for money that you need tomorrow. They're sadly only one way to buy them. Retresorydirect.gov. Go to the site, open an account, link your bank account. You can

click buy direct fair warning here. This site looks like it was designed in 2004 because it basically was. It is clunky as heck. The last time I logged on, I used this virtual keyboard where you have to click each character individually. But it works at the end of the day. It's honestly worth the 15 minutes of frustration for the inflation protection that you're going to get on the other site. I just wanted to give you that caveat though. Next up, tips. Tips stands for Treasury

inflation protected securities. This is a more sophisticated cousin of iPons. Tips work in a way

that actually makes it more powerful for long-term investing. I'm going to explain this at a high

level and it's going to sound maybe a little bit confusing. But then I'm going to give you an

“example and I think it will actually click. Tips have a fixed interest rate like a regular bond.”

But instead of that rate being applied to a fixed principle, it's applied to a principle that adjusts with inflation every single day. So if inflation rises, your principle goes up. And since your interest payments are calculated based on that adjusted principle, your interest payments will go up if your adjusted principle goes up too. When that bond measures, you get the inflation adjusted principle back or your original investment, whichever is higher. So deflation

is not going to hurt you, but that's an episode for a different day. I know this might sound complicated, but here's an example, hopefully to clear it up. If you buy $1,000 in tips and the interest rate is 1%, you get $10 in interest payments. If inflation stays the same, nothing happened, but this is a really good part. When inflation goes up, let's say it goes up 5%, your bond is then worth $1,000, $50. And then your payment goes up as well to $10.50 instead of just $10.

I know the $50 doesn't sound like a lot, but if you own more tips and inflation gets insane,

over 2% above inflation. So that means, over the life of the bond, you're earning 2% on top of

“whatever inflation does. So if inflation continues to be 4% for the next decade, your total return”

would be roughly 6%. That is meaningful long-term money. Tips come in 5, 10, and 30-year materties. If you don't want to manage individual bonds, I totally got that. You can buy a tips fund through an ETF, like Vanguard's VIP, SX, or I shares TIP, which gives you diversified exposure to tips across different materties. One other thing to know here. Tips are way better for long-term money than short-term savings. Because their principal fluctuates with inflation,

if you need to sell before maturity, you have to deal with market pricing. And in a rising real interest rate environment, that can mean a loss on paper. So hold them to maturity and your protected. Trade them in the middle and you're exposed to normal bond market risk. Charles Schwab published an analysis noting that right now, while most tips yields are positive, very short-term tips did briefly turn negative after the Iran War began in February. So again, these are designed

“to be long-term inflation hedges, not short-term cash substitutes. So just remember that.”

Now, last but certainly not least, gold. The relationship between gold and inflation is real, but not exactly simple. So this is the least direct option to hedge against inflation. You've been warned? With that said, over long-time horizons, gold is a reliable store of value. From January of 2016 to January of 2026, gold return over 300%. US inflation over that same decade totaled 33%. So gold didn't just keep pace with inflation. It absolutely smoked it.

At the time, I'm recording this gold is trading at around 4,400 bucks per ounce, which is up $1,000 from a year ago. The all-time high was $5,600 per ounce, which it hit in January of this year. Gold rises when uncertainty is high, and when confidence in institutions is low. It is called the flight to safety asset. Right now, we have a war in the Middle East.

“We have persistent inflation, a federal reserve that cannot start fighting within itself.”

Global central banks buying up gold at a significant pace. JPMorgan forecasting gold pushing toward $5,000 an ounce by Q4. All of these things create a very

favorable environment for gold right now. But gold does not always rise in lockstep with inflation.

Gold is not an i-bond, which is designed to do that. During the inflation surge during the pandemic, a lot of people bought gold expecting it to immediately skyrocket as CPI climbed. But it didn't. At least not right away. That's because of this exact flight to safety idea. Gold tends to rise when the real return on safe alternatives like bonds is low or negative. So, when the Fed was aggressively hiking rates in 2022, and yields went up,

gold actually traded sideways despite inflation. In 2020, six with the Fed on hold and real rates under pressure, gold is much better positioned. Gold really thrives when the economy is

basically a dumpster fire. When everything is going wrong all at once, currency

debasement, institutional collapse, geopolitical shock. In this environment, gold really shines. No pun intended. Maybe a little. So, I'd say gold is less an inflation protection move and more of a wealth preservation move. Sometimes, those two things are the exact same thing, and sometimes they're a little different. To invest in gold, you can buy the physical asset, but that's kind of an unhinged move. I would not recommend it. There are much easier ways to do that,

and I have talked about this on the show before. I've linked that episode in the show notes. All right, so let me put a full bow on this, a beautiful, beautiful, gold bow. Today, I covered three tools. I bonds for medium term savings that need automatic inflation protection earning 4.26% today with the rate adjusting as inflation moves. We talked about tips for a long-term money where you want real return above inflation baked in structurally, and we've talked about

gold for a long-term wealth preservation as insurance against currency debasement, and the kind of compounding inflation that makes $100, if you feel like $60 a decade from now. These are not the sexiest investments I know that. I bonds are not going to make you a millionaire, but while everyone else is watching their savings account yield, 0.5% while inflation runs at 3.8%, you could be staying even or better. And you know what, in the wealth building game over time, not losing ground,

If you're buying I bonds, consider what's called a gift box strategy to effectively double your

“annual purchase limit. Here's basically how it works. You can purchase I bonds as a gift for your”

spouse or vice versa and hold them in a treasury-direct gift box without actually delivering them

until the following calendar year. That means in one calendar year, you and your partner can each

“buy $10,000 in I bonds for yourself, plus buy a $10,000 gift bond for the other person,”

potentially stacking $40,000 in I bond purchases in a single 12 month window. The gift bonds are an

interest from the moment they're purchased, even while they're just sitting there in that gift box

“waiting to be delivered to the other person. But you know what, this is one of the few legal”

government-sanctioned ways to stretch that I bond purchase limit.