Is the Strait of Hormuz challenging your Summer Plans?
The price of gas is all over the place, literally and figuratively. Literally, it has been up and down at the local pump. It is normal for prices to go up in Summer (Law of Supply and Demand). Figuratively, gasoline affects transportation costs for goods we purchase and goes into products we buy. Want to excite the family? Mention that tonight you are holding a discussion on ECONOMICS. I can hear the cheering from here (NOT). But how is the price of gas affecting your trip to Lake Tahoe or Disneyland. It is 425 miles from Napa to Disneyland. Let’s say the car gets 25 miles to the gallon, which means you are going to burn 17 gallons of gas to get there. So if gas goes up by $1 per gallon, the trip is going to cost you another $17 or $34 round trip. Would you eliminate the trip for $34 of additional cost? Probably not, Would you spend a few extra minutes trying to figure out how to save on the cost. Probably. To start out you may fill your tank with the least expensive gas in Napa. Next, you know that gas stations close to the highway charge higher prices than those further away. One family I know looks for Costco as their tank gets down to one quarter full. Speaking of gas stops, what else happens when you make the stop - SNACKS. Maybe pack your families favorites before you leave. Now what are you going to do with all the money you saved by thinking ahead?
The Stock market as measured by the S&P 500 index is helping a bit. As of this writing (June 9), the S&P 500 is up 7.82%. There are Certificate of Deposit to be found in the high 3% and low 4% for short term money when you want some protection for your principal. Again, a bit of forethought on your savings can mean a big difference when stuff happens. Let’s say you had $50,000 at the beginning of the year in savings invested in the S&P 500. Now it’s worth $53,910 ($50,000 X 1.0782). One pocket (the one paying for gas to Disneyland) just lost $34. The savings pocket gained $3,910, your net worth is up $3,876 (3910-34). I realize this is a simplistic way to look at things and lifetime memories are highly valued.
When we create plans for clients, we try to think of the possibilities their future holds and suggest solutions. Often people come for investment advice and in addition get insurance advice. It is great to hit the savings target, but not so good if unforeseen expenses (nursing home stays) hit and there is no insurance company on the hook to help out.
Lots to consider but #1 priority - have some fun this summer! In looking at the calendar, we are closed on Friday June 19th for the Federal holiday and Friday July 3 for the 4th of July. Just in case you’re wondering, we close when the Stock Market is closed, plan accordingly. And yes, some of us are off to Disneyland this year, get your Mouse ears on!
"Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing."