Andrew Shilling at MarketWatch asked advisers what they were doing in their own portfolios and budgets as inflation hit a three-year high of 4.2%, with oil up more than 58% in a year and airfare and grocery staples climbing double digits. I answered as a household, not just a planner.
On the portfolio, I shifted some cash into shorter-duration Treasurys and I-bonds when rates were favorable. I did not rebalance out of equities, because stocks are still the long-run inflation hedge, but I made sure I was not holding two years of cash in a savings account earning nothing. That is dead money right now. Cash needs to earn something close to the inflation rate or it is losing every month it sits.
On spending, the biggest thing I have changed is how I think about fixed versus variable costs. A few years ago I was pretty loose about discretionary categories. Not anymore. I went through every recurring charge and cut the ones I had not thought about in six months. Subscriptions, memberships, the auto-renewals that never get questioned: that is where inflation hides in a household budget, because each one is small and together they are a car payment.
Neither move is dramatic. That is the point. Inflation is fought with a dozen unglamorous adjustments, not with one bold trade.
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