Happy National Dollar Day!

I’m sure that when you woke up this morning you thought, “Today is going to be a great day! It’s National Dollar Day!” The first statement probably is not true. The second statement is.

August 8 is National Dollar Day, and it commemorates the day in 1786 that Congress established the U.S. monetary system. The first dollar bill was printed in 1862 with President Abraham Lincoln’s Secretary of Treasury, Salmon P. Chase, featured on the bill.

I worked as a bank teller in Nashville the summer after my freshman year of college at Vanderbilt. That was the summer of 1989. We learned how to spot counterfeit bills, how to manually count large sums of cash, and that you can’t always judge a book by its cover. Oftentimes the people who appeared to have the most money didn’t, and the people who looked like they didn’t have money actually did.

The minimum wage in 1989 was $3.35 per hour. The current federal minimum wage, established in 2009, is $7.25. That is an average annual increase of 3.9% over the 20-year period. The US Inflation Calculator says that the same 20-year period experienced a 3.65% annual increase in inflation. But, there have been no federal minimum wage increases since 2009. Inflation has averaged 3.1% per year since 2009. For the period of 1989-2024, the federal minimum wage has only increased by 2.2% per year while inflation has averaged 4.4% per year. The dollar is definitely not buying as much as it used to buy!

Inflation, and its effect upon the dollar, is one of the primary factors that can weigh heavily on a long-term financial plan. Whether one is planning for retirement, a major purchase (retirement home) or gift, or for long-term care, the rising costs of goods and services must be systematically evaluated and counteracted. 

With current rates for savings, money markets, and CDs somewhere in the 4-5% range, many people are happy to have a relatively good return for relatively low risk. But, this risk-reward tradeoff will not last forever. 

Therefore, for a successful retirement, decisions have to be made – preferably sooner rather than later – along the lines of the following: “Can I accumulate a large enough nest egg so that I can earn a low rate of interest and take a lower level of risk?” Or: “Do I need to take a higher level of risk in order to attempt to achieve a higher level of long-term return since my nest egg is not large enough to earn a low rate of return?” You can’t have your cake and eat it, too.

National Dollar Day might be a good opportunity for you to evaluate your current level of spending, your current level of savings and investments, and their relationship to each other over your remaining life expectancy. You know your dollar will buy less in 10 years, and a lot less in 20 years. People are living longer and retiring early. This analysis needs to be done as soon as possible to give you the opportunity to have enough dollars with which to celebrate many more National Dollar Days!

Walter L. Woodrick, a Gulf County resident, is a certified financial planner practitioner and author of two books. His website is WoodrickFinancial.com, and his text number is 850.724.1369. Securities and advisory services are offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. #609416-1