ROCHESTER, N.Y. (WROC) — CPA Matt Bryant from the New York State Society of CPAs discussed rising inflation and the steps you can take to mitigate its impact Thursday during News 8 at Sunrise.
What is inflation?
· Inflation is the rate at which the price of goods and services increases
· Inflation is calculated by comparing the current price for a set of goods and services to previous prices for those same goods and services
Why does inflation matter?
· It costs more money to buy the same goods and services than it used to
· As costs to a business increase, they will usually begin to charge higher prices to their customers for goods and services
Is there anything good about inflation?
· Yes, as businesses compete for employees, they will usually start offering higher wages in order to attract employees
· Businesses are able to increase prices, which can help their cash flow
What actions are taken to attempt to control inflation?
· An increase in interest rates is a step usually taken to control inflation
· As the cost of borrowing increases, people and businesses will borrow less, which leads to less money in the economy, which can lead to lower prices for goods and services as demand declines
How can you protect against inflation?
· Seek out safe investments. Cash will be worth less as inflation continues so getting a return on your money can help offset the impact of inflation.
· Diversify your investments so if one declines, the other may increase to offset
· If possible, keep a long-term focus as inflation is not permanent
What if someone has more questions about planning their financial path in an era of inflation?
· A trusted certified public accountant can be a great resource for a personal financial plan to address inflation and other changes that may come up