Rizek Housari, CPA, CFP®
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How often have you heard someone say that the dollar will collapse? You know, the whole “end of the world as we know it” phrase. People usually blame the actions of the Federal Reserve (Fed) and government policies.
Typically, all the idea does is spread fear and paralyze Americans from investing in their future.
While the dollar has lost value, primarily due to widespread inflation, the picture is not all bleak. Compared with other currencies around the world, the dollar has gained considerable value in the last few months.
Recently the dollar achieved parity with the Euro. Parity is a fancy word that means the conversion rate between the two currencies is one to one. For the last 20 years the Euro has been “stronger” than the United State Dollar.
Translation: Now is the time to start planning your next vacation to Europe. Croissants in France and Napoli pizzas are significantly less expensive for Americans than they were just one year ago.
Confession: This is one of my favorite parts of being a financial advisor. Helping the families I team up with to go on a big vacation.
Maybe that is what I should start telling people I do for work. “I tell people when to go on vacations” sounds so much better than “I’m a financial advisor.” Don’t you think?
So why has the dollar been doing so well lately. A few reasons:
- The US economic recovery has been stronger than much of the world after the impact of COVID.
- The Fed has raised and will likely continue to raise interest rates, while the central banks of other economies keep them low.
- Conflict in Ukraine and in other parts of the world have driven demand for the world’s reserve currency, the US dollar. Not to mention the leading defense companies in the world do business in USD.
There will always be pessimists focused on the permanent downfall of the US economy, or the world for that matter. Sometimes they use this strategy to sell gold or silver to unsuspecting television viewers in the middle of the day. Sometimes they use it to sell life insurance. Don’t ask me why. I guess they still think that because America left the gold standard more than 5 decades ago, we are still at significant risk of losing everything. I’m not convinced.
The point is, worrying about the dollar should not be on the top of your list. In fact, I’m not sure it should even be on the list.
Planning for your financial future should be at the top. You are not in control of everything that happens to you, but you can control the things that matter most. How much you save. How much you spend. How you invest for the future. How you spend your time.
Live life. See the world. Fly fish.
That’s on the top of my list.
Rizek Housari, CPA, CFP®
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