Will inflation control us or vice versa?

While millions of people try to maintain their simple way of life, others are posing as bandits in this time of inflation.

Take Chipotle CEO Brian Niccol. He earned $38 million in 2020. That’s 2,898 times more than the median employee at the store level. Even as profits soared, Chipotle raised prices by 10% over the two-year period 2020-2022. Thus, putting more pressure on the pockets of average Americans who eat there while their CEO lives in luxury.

Chipotle isn’t the only problem. Starbucks also raised prices even as profits soared more than 30% last year. And their CEO, Kevin Johnson, received a 40% increase in his compensation, which over the previous year was more than $20 million. The company, when interviewed, said the compensation and compensation of the CEO cannot be compared to the cost of the product. It is true that the two are determined according to different criteria, but that does not mean that they are not related. If the company makes more money by raising prices that people seem willing to pay for, CEOs benefit. The typical CEO-to-worker ratio is around 350 to one, which is extraordinary in my opinion.

For companies like Chipotle and Starbucks, raising the prices of their products and pampering their CEOs, as they did when inflation was already rising and they were already making profits, certainly adds to the overall inflation problem. But companies like Chipotle and Starbucks are only part of the problem.

In May 2021, just over a year ago, the US economy was rebounding from the early stages of the pandemic thanks to billions of dollars in fiscal stimulus. There were fears that inflation could result, but Federal Reserve Chairman Jerome Powell said he was not even thinking about raising rates. Now, a year later and with inflation continuing to rise, he and President Biden have met to determine what action to take.

This is an incredibly annoying problem, which I’ve written about before. No one is totally in control, not Powell or Biden. It’s a global problem right now. But some, like the CEOs of Chipotle and Starbucks, certainly shouldn’t be feeding at the trough of inflation.

As has been made clear, even last year stimulus checks and pent up demand after a year of covid meant people were buying again and putting demand on the supply chain. But that was last year, and stimulus checks weren’t the only problem. So blaming it on government spending doesn’t help the situation either. In fact, stimulus checks have helped many pay off their credit card debt. But, again, that was the past, and now credit card debt is on the rise! The government hasn’t done that; people did it themselves. Consumers are making the problem worse. Yes, inflation has created a situation where people feel the need to use credit, but are they really using it well. Or are they just spending on many unnecessary things rather than focusing on what is really needed?

And with the federal government poised to raise interest rates further, credit card use will only get worse for those already in deep debt or those heading in that direction.

Financial planner and author Dan Wyson recently wrote about “America’s growing financial illiteracy” and made some salient points about the lack of financial knowledge on the part of many in our society. It specifically targeted young people. Unlike those of the greatest generation, who learned about deprivation and thrift, and many members of the Boomer generation, who learned from their parents’ generation, later generations are accustomed to a life of abundance and spend freely. It seems that children don’t learn how to manage their money wisely at home, because they consider “buying more” to be the rule. As we know, Amazon is always ready to satisfy their need!

But according to credit statistics from Finder.com, young Americans may be on a better path. “Americans under 30 have the lowest amount of credit card debt of all Americans at 6.3 percent.” “Americans ages 50-59 hold just the most credit card debt at 22.6 percent.” Of course, people between the ages of 50 and 59 are often at the highest income point of their lives. Americans earning less than $25,000 have an average debt of $3,000. 14% of Americans have ten cards! Gen Z (born between 1997 and 2012) has the lowest average card count at 1.4.

Impulse spending, however, seems to be a problem. A survey in May this year showed that 73% of respondents, three out of four, said most of their purchases tend to be spontaneous, a jump from 59% in the previous year’s study . So inflation is a problem, but when people buy spontaneously a lot of the time without giving enough thought to those purchases, it adds to the problem. The average person spends $315 per month on impulse purchases, up from $276 in 2021. And the maximum an average person will spend on a single item is $310, also up from 2021, which was $277. Now, you can say that inflation caused this cost increase, but we decide whether to spend the money or not. And, the impulse means you didn’t plan it. Those who let their whims determine their actions are bound to have problems.

Savings rates have fallen to their lowest levels since 2008. In the first quarter of 2022, 537 million new credit card accounts were opened!

Here are some things to consider. American children own 40% of the world’s toys but represent only 3.1% of the world’s children. The average American family spends $1,700 on clothes a year and throws away 65 pounds of clothes a year!

Some warn that by reducing our spending, a recession could result. But let’s take control one problem at a time. Currently, inflation is the problem, not a recession. Minimum wage increases and higher employee salaries make people feel more comfortable and willing to spend, which also fuels inflation. Many have a “fear of missing out” on life experiences, which drives them to spend and travel more. Yes, the cost of necessary items such as food and gasoline has increased, but individuals can handle this better than themselves. It is obvious that this is not done very well. Let’s not condemn President Biden and others for our own lack of self-control. If we spend at Chipotle, Starbuck, Amazon and others – many of which raise their prices – we help their bottom line but hurt ours.

Lisa Rutherford is a resident of Ivins.

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