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Dec 14, 2023 By Gary Boatman 3 min read

Inflation has been a major concern for the economy over the last two years. This week, we are going to discuss it with a seasonal theme.

Every year for the past 40 years, PNC or its predecessors have calculated how much it would cost to buy the presents from the song 12 Days of Christmas.

To buy all of the presents, it would cost $46,729. This is an increase of 2.7% from last year. In 2022, the increase was 10.5%. While not increasing as fast, prices almost never return to past lower prices. This year, there were no price increases for four calling birds, five gold rings, seven swans-a-swimming, eight maids-a-milking or nine ladies dancing. The biggest jump was for the pear tree, which saw a 15% increase.

Rising wages were a big influence as we know in the current tight labor market, salaries have been rising. This was represented by 10 lords a-leaping, 11 pipers piping and 12 drummers drumming. The lords are actually the highest price at $14,539.20. If you bought all of the repeats in the song, you would need a big budget as all 364 gifts would cost $201,966.66.

This bank survey was first done in 1984. Ronald Reagan was the president, and it was a much different financial world. The government did not have a huge deficit. The 401(k) was just starting to replace pensions and the S&P average was about 186. The average income for the country was about $21,600. Prices were also much lower with a gallon of gas $1.27, first-class stamp 20 cents and a loaf of bread 71 cents.

There was a major shift in how Americans saved in the early 1980’s. As U.S. companies had to compete with international companies, they started to abandon pensions and move towards 401(k) plans. This forced many new investors to buy stocks. Since the stock market is the biggest auction in the world, values increased as more investors bought. That is a big reason that the S&P went from a very low value in 1984 to around 4,600 today.

Investments were not the only financial area to see major shifts since 1984. There was concern during the Reagan years about exploding consumer debt. It reached a new high of about $2 trillion dollars. Today, the figure is about $17.29 trillion. It seems like consumers have actually acted the same way as their government. It is important to remember the population has increased during these 40 years, but the debts have risen faster.

Consumer debt is very important to keep in mind as you finish your Christmas shopping over the next week and a half. Do not put purchases on a credit card that you cannot pay off in full when the statement arrives. These interest rates are about 20%. Making just the minimum payment takes years to pay off. Decisions you make now can have a big affect on financial stress in the new year.

For the longer run, this information is important because a retirement plan must adjust for inflation. While not many last 40 years, many do continue for 25 to 30 years. This means the plan must have some guaranteed income, inflation protection and be tax efficient. Maximizing Social Security is important because it is one of the few retirement assets with a cost-of-living adjustment. Most people do not plan to fail, instead they fail to plan.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”