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Inflation is coming but experts don't know when

An Austin wealth advisor said being prepared is the best plan.

AUSTIN, Texas — Hold on to your wallets. After years of low interest rates, inflation is on its way. It's just a question of when. 

KVUE turned to Adam Flagg with Austin-based Collective Advisors for a closer look.

"As for when it can happen, I think ultimately it comes down to how well the Federal Reserve can control interest rates. So if they're able to continue to keep them low and the economy slowly starts coming back, and we see people spending more money on entertainment and travel and all those things, then maybe we can manage it. But if all of a sudden the economy overheats, that's where interest rates and inflation start to become something that can become a problem. I wouldn't predict anything like the early 1980s where we saw double-digit inflation. But I do think that in the next year or two, it's a real possibility," Flagg said.

As a way to prepare, financial experts point to investing in real estate, but if you're familiar with the Austin market, then you know it's normal to pay 40% above the asking price. Realtors have also said the inventory in the entire Austin metro and surrounding area is also pretty low. That's why there are bidding wars. 

For less expensive options, Flagg suggests asking your boss for a raise.

"[The] cost of goods and services [is] going to go up soon, and when they do, we want to make sure that we're being compensated appropriately to keep up with that inflation cost," Flagg said.

Flagg also recommended investing more in 401(k) because stocks generally track well with inflation. As a result, he said you'll see more money in retirement.

Also, he said now is the time to refinance homes, cars or student loans before rates go up.

Flagg warned of adjustable rates – what looks like a good deal now may not later.

"Another thing that you need to think about is the interest rates that you've been getting paid at the bank, next to nothing. So they've been very low for a very long time, and you really need to consider what have you been doing with your money during this ... I guess I call it a 'COVID rally' in the stock market? Have you been conservative this whole time? If you have, you probably need to kind of look at how you've been investing, because what's been conservative in bonds for a long time could become a very risky investment for you once inflation starts to climb. So I would recommend having a professional review that portfolio and really make sure that the bonds and the fixed income and the interest rates, they are prepared for an inflationary environment," Flagg said.

Flagg also advised paying off debt with high interest rates because when inflation hits, you could end up paying more in interest rates.

While other experts recommend investing in precious metals, Flagg doesn't because he said it's too risky. Bottom line, inflation has taken most of us by surprise but if we prepare, it doesn't have to be painful. 

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