Have you heard the saying that bad things come in threes? Well, get ready for the triple whammy of the 2021 holiday season.
You would be hard pressed to find a time when the global supply chain was such a common topic of conversation. Whether on social media or on network news, discussions about shortages are omnipresent. And they are only escalating. Add to that the inevitable impacts of rising inflation and worsening labor shortages, and you have a triple threat that will clearly impact the holiday season.
The good news is that with a little planning, it is possible to reduce the impact these factors can have on your household finances. But that requires a careful and lucid examination of three key factors.
Although the numbers are still a little lower than they were before the pandemic, searches for international and domestic flights have risen significantly from 2020 levels – up to 212% higher in some cases, according to the Kayak online travel agency.
While at first glance this may seem like a sign of a return to normal, in reality it is likely a harbinger of higher prices, last minute delays, and possible cancellations. . One of the key factors is the rise in the price of oil, which recently closed at a seven-year high of $ 80 a barrel. It is therefore difficult for airlines to compensate without passing these higher prices on to consumers. Many travelers have already noticed significant increases over flight prices just a few months ago.
And while you can afford a ticket, there’s still a possibility that a scheduled flight won’t go as planned. In a sea change for an industry that struggled with a surplus of manpower just a year ago due to travel restrictions linked to the pandemic, the airline industry is grappling with a severe shortage labor. In October alone, Southwest canceled approximately 2,000 flights at an operational cost of $ 75 million. In August, Spirit Airlines canceled 2,800 flights, citing a lack of skilled workers. And all this before the holiday wave.
That said, the airlines are hoping to mitigate the damage somewhat. In a recent memo, American Airlines said it plans to hire 4,000 new employees this quarter, while also recalling nearly 1,800 flight attendants from long-term leave. Likewise, Southwest is targeting 5,000 new hires by the end of the year.
Rising food prices
In recent times we’ve all experienced the occasional bare shelves in the grocery store, which is the result of everything from truck driver shortages to supply chain issues. And the goods that remain keep increasing in price. In October, the consumer food price index rose nearly 1% from August to September 2021 and 5.4% from September 2020. This is a problem in a year people are predicting larger holiday gatherings to make up for the smaller celebrations of last year.
The cost of a whole turkey (between 8 and 16 pounds) has almost doubled since 2019, according to a Wells Fargo report from 2021, citing both increased demand and reduced production. This drastic increase serves as a microcosm of what shoppers can expect to find in the supermarket when making their holiday eating plan. And it deserves some planning – and shopping – up front. If you are one of those who hand over all of your vacation ingredients until a day or two before your meal, you might want to rethink your strategy. Logistical problems in getting the products to stores will mean that many items will sell out sooner than expected.
If you haven’t ordered your Christmas presents yet this year, you’re basically catching up. A survey conducted in early October by Morning Consult found that about 50% of U.S. shoppers started their 2021 holiday shopping early. Despite this, many still struggle to find merchandise. The survey showed that 51% of first-time buyers said stores ran out of at least one item they were looking for, and 54% said a product they wanted was out of stock online. And 49% have to wait for out-of-stock or delayed delivery from an early purchase.
And like the supermarket problem, scarcity is only part of the problem. Consumer prices in the United States jumped 6.2% in October from a year ago, as the costs of food, gasoline and shelter climbed below the rate of inflation the highest in 30 years.
This surge in prices has been fueled in large part by strong consumer demand – a demand that is increasingly difficult to meet due to overseas factory closures linked to the pandemic. In a desperate attempt to keep workers, American employers also raised wages and then passed on those labor costs in the form of higher prices.
And that’s not just limited to the big chains. According to a new Business.org survey, 82% of small businesses have increased their prices as a direct result of the rising rate of inflation.
Don’t let the holiday hiccups force you to make bad decisions.
For the three factors listed above, proper planning and effective budgeting are essential.
If you’re traveling during the holiday season, use your airline’s app to track your flight status. Not only can it notify you of everything from a door change to a delay or cancellation, but it can also help you reschedule if necessary. Also try to schedule flights in the morning if possible. Delays accumulate throughout the day, so you have a better chance of being accommodated on a flight on the same day if you were to initially leave earlier. And while that is not always possible, it is always a good idea to have a plan B. For example, if your destination is passable, have a car handy.
When it comes to food and gift planning, the number one tip for consumers would be to budget and stick to it. While it can be tempting to bank more on credit cards and debt to offset higher prices this year, it’s never a good idea to spend more than you can afford.
Set a strict spending limit that allows you to cover your regular expenses while staying within your means. Also, research the prices to get a better idea of where you need to allocate your dollars. And finally, don’t be afraid to narrow your gift list. After all, everyone faces the same economic realities this year. Something as simple as baked goods or a homemade gift can be enough to remind people that you care.
In times of economic tightening, sticking to a tight budget becomes even more important. The holidays are known to encourage otherwise responsible spenders to impulse purchases. But keeping an eye on the price in the long run and avoiding debt burdens this holiday season can be the best gift you can give yourself.
Jennifer Pagliara, CFP, CTFA, is Executive Vice President and Financial Advisor at CapWealth and a proud member of the Millennial Generation. His column is aimed at his peers and anyone else who wishes to progress financially. For more information on Pagliara, visit capwealthgroup.com.