Is Inflation Making us Crazy? #449

So I don't know, it just depends on Usually it's when I'm just at Costco. I try to fill up at costcocause it's always cheaper than But there are a couple of places. It turns out. I used to think that the Kroger. The Kroger has got to be the most expensive place. So that's what I was gonna say, is we used to always go to the local Kroger.

It's really close to our house. Um, and because occasionally we go to Kroger for some groceries and we always have some points where we get the discounted price per gallon on gas. But recently I noticed that just a gas station a BP just a mile down the road. It was something like twenty cents cheaper per gallon. Uh. And here's the thing, this isn't a gas station that I have to go out of my way to reach.

This is on the way to Aldie. We've always said it's cheap if you're gonna drive across town of the same, but if it's easy to save, go save the money, exactly. And so initially I noticed this a couple of months ago, And initially I thought that maybe they had just not raised their prices, because this is when price we were

seeing prices take up pretty significantly, pretty dramatically. Uh. But dude, it has consistently stayed twenty cents at least twenty cents cheaper than Kroger, uh than the shell further up the road as well. And so I have changed. I mean, this isn't a big deal, right, Like, you're only talking twenty cents per gallon, and we don't even drive all

that much. The bottom line doesn't impact us all that much. No, But I wanted to share the story because it takes breaking out of the habits and the mindset that we typically do think sometimes in order to save us money. Right, So I think like when it comes to groceries, sometimes we might think, oh, well, we always have to get this product or or this cut of meat. This is we always eat ribbies, you know, we always eat boneless, skinless chicken, yes exactly, but instead to consider some of

the other options. Ever, we're more flexible. That can save us in a big way. It also makes me think about like cell phone service. I was just talking to a buddy recently and he was like, yeah, I'm still

paying a lot of money for my Verizon service. And I spent a good five minutes and he was interested, and I wasn't just like brading it down the throat, and I was explaining to him h M v n o s, which are the mobile virtual network operators which operate on the backbones on the networks of the major you know, big names, but they charge you a fraction

of the cost. And so, for instance, you and I were on Mint Mobile, right, and they operate off of T Mobiles networks, and you get all the great speed that comes with a T mobile, uh service, but at a fraction of the cost exactly. But so many people are just stuck in their ways paying the same phone

company the same amount of money every single month. And and yeah, actually right now, like Mint has that three by three months, get three months, three get three so it like takes that super cheap phone service down to an even lower price for those new customers. So yeah, well we'll link that in the show notes. By the way, people want to know about it. But Matt, let's move on. Let's talk about the beer that we're having on this show.

This one is called Chocolate Pecan Porter. Do you say pecan? Pecan? Uh? Pecan? Okay? Wecan? I think I did like a blending of it too, like a hybrid. I had it in my mind. So I grew up saying pecan because I was raised in the South. Yes, but now I say pecan because I live in the city. Now you're you're very refined. But yeah, this one is by Tim Blore Brewing, and this one was sent to us by listener Ryan, who works for the brewery. So we're always always down for delicious craft beers. Ryan,

thanks for sending these ones to us. But Matt, let's get onto the subject at hand. Let's talk about inflation. Let's do it. And you know, it just kind of made me think the other today, how how nutty the conversation around inflation has gotten. Uh it, I don't know why. It kind of made me reflect on one of my friends who like a decade ago, ended up getting diagnosed

with prostate cancer. And yeah, tough diagnosis to receive, and it was like obviously just an emotionally difficult time for him, for his friends and family, everybody who was close to

him and who loved him. Um, but there's this belief, I think when it comes to cancer that you gotta go like harden fast in order to eradicate it, right, that it's the fight against cancer exactly exactly, And so there's this, Yeah, there's this belief that you gotta treat it, you know, treaty quickly, and you gotta throw like all the ammunition at it at once, exactly. And so yeah, for unfortunately, my friend, he's doing really really well these days.

But that's actually largely because he took the opposite approach. He decided not to throw the kitchen snake at this cancer. He decided to do something called watchful waiting or it's also known as active surveillance in the prostate cancer community, basically keeping an eye on the growth rate of the cancer and the potential symptoms, so that action can be taken if need be, But the point the hope is to not take action too soon because that could actually

greatly diminish the quality of life for the patient. That surgery is obviously invasive, and you and I were obviously we're not doctors, were not cancer experts. Recently, we did an episode where we talked about I feel like we talked a lot about dieting recently, and so what we're

definitely not nutritionists, we're not doctors either. It's just anecdotal evidence to support something that we're gonna talk about this outside like we'd like to dabble, right, But it's just interesting to see how overreacting can actually create more problems depending on the circumstance that you're going through, right, And so in this case, reacting too quickly and having that invasive surgery could have had other more consequential side effects,

and so waiting made the most sense. And you know what, in over a decade, he hasn't had to have any surgery and he's living a great life. And so yeah, could the same be true when it comes to inflation that maybe we're overreacting a little bit. That's kind of what we want to talk about today. Yeah, that's right. You know, it's understandable that many folks are starting to worry about inflation. For the most part, it's been minimally impactful, you know, for so long that most of us hardly

even remember that it exists. But that's all changed over the past year due to a variety of factors. Right. First of all, many of us have more cash in our bank accounts due to stimulus payments, due to the inability to spend our money like we normally would due to COVID, so there's a ton of pent up demand. And then on the supply side of the equation that has also been massively disrupted and companies are having a tough time catching up. Pandemic related shutdowns are still impacting

companies across the world. And so you combine all these different factors, UH and inflation. It hasn't been as high as it is currently for over thirty years. But the question that we want to ask, though, is that should we be concerned about it? Because you know, we we don't want to read the headlines or watch the news and then just react in drastic ways that are gonna undermine our finances. Um And it turns out in a recent poll we saw that of few well said that

they are very worried about inflation. And you know, all these substantial levels of concern about inflation, they're actually starting to concern us, concern you and me. Yeah, we're like, no, there's just maybe too much talk about it. It's it's gotten overblown, and it just seems like it's one of those narratives that's spun out of control where we're all talking about inflation and we're all like looking at it constantly. We're looking for signs of relief or we're looking to

numbers to prove how bad it's gotten. Yeah, for political reasons. Yes, sometimes it gets hyped up because folks have a different agenda exactly. Yeah, And it feels like there's like some sort of a psychological shift taking place in our brains collectively, because in that same survey, forty percent of folks said they plan to reduce their spending on restaurant meals and on takeout, said they plan to skip upgrading their personal

technology devices. Folks said they're going to purchase less clothing or delaying or canceling travel plans, and of folks said they plan to drive less, a lot of changes. Yeah, there's a lot of changes that people are making their lives because of inflation. But yeah, holding off on purchases, buying fewer things overall, that's a natural reaction to rising prices.

I get it, and those can be wise financial moves no matter what's happening with the inflationary numbers, you know, anecdotally, Matt, there was a post in the how to Money Facebook group that I think it kind of echoes how a lot of people are are feeling right now. A listener said, should I be buying more stuff now because of the fear that prices are gonna rise in the future. It's like, should I should I frontload those things that they're on

my wish list? I was planning on holding off until next year or till like, yeah, like fall of next year. But I'm just worried it's gonna cost more now, so should I jump in on that thing? I think that question reflects another place that this inflationary environment can push us towards. It can push us towards spending more money now, even if maybe we don't have that money exactly. Yeah, So but before that we talk about how to ensure

that rising costs inflation prognostications don't make you crazy. I think it's really important to remind everyone at inflation is just something that is always taking place in the background of our economy. You know, most of the time, it's it's something that we just don't even notice, you now, even though it's still kind of humming along. It's sort of like the sound of the like the compressor fan

on your fridge. Like, just because you get used to it doesn't mean that it's not consistently chugging along, or at least that it you know, it should be. That's how your fridge days cold. And so just because inflation isn't typically in the headlines, that doesn't mean that it's you know, been sitting at zero up until now. If if you look back at the data actually over the last thirty years, the average consumer price index is two point four percent. Like that is a real rate of inflation.

And so it's it's just important to keep that in mind because they can often get discounted when inflation is discussed today. Um, when when you see it in the headlines. And I wanted to mention this too, because we're talking about inflation right now, so aren't we a part of the problem. But I just want to make it clear that we've been talking about inflation way before it was cool. We've been basically ever since we started talking about investing

on this show four years ago. Inflation was one of the reasons that you should be investing. I will say, we are always a part of the problem. Just that's just generally how we roll. It's true we we like to make trouble. But yes, I agree we we have been talking about inflation every time we have to talk about risk when it comes to investing, Inflation is the thing that pops up, because that is the thing in the background continually eating at your money if you don't

take the necessary risk of investing. There's a known quantity of risk, and that is inflation. So it's important, the sure and steady risk exactly. It comes up in every conversation that we have about investing. It seems like in appropriately. So so yeah, we're not trying to be fearmongers here

when it comes to inflation. I think, in fact, we're trying to do the opposite with this conversation, and maybe trying to tamp down the fears the people that people have and and hopefully we'll all become a little less crazy when it comes to how we think about inflation and how we react to it. I think it's also important to note that age likely plays a factor in how you perceive inflation, because, yeah, even though inflation has been like you said, Matt Humming in the background, it's

still significantly higher than what our generation has ever experience. Right, Let's say you graduated from high school or college ten years ago, and only then did you start paying attention to prices, really, uh, except for maybe prices right with your grandma on like a Tuesday afternoon when you were out of school, Well, you only experienced inflation that was an average of one point seven percent. So those prices

were taking up just incredibly slowly. And so many of us have never experienced inflation like we're currently seeing it, but our parents have. Right back in the seventies and eighties, the average inflation rate was over six percent, kind of similar to where we're at now. And so yeah, if you wanted a mortgage back then, you were looking at a thirty year fixed rates that were bumping up close

to eight per cent. So we just like live in different financial times, and I do think age provides some proper perspective, or at least knowing your history can provide some proper perspective into that reality that inflation is always at play in some form or fashion. Uh and that rate of inflation just changes over time depending on other

circumstances happening in the economy and in the world. That's true, man, I think it's in what you said to just what we've experienced over the past decade is something that we can't underestimate. Right. For a lot of us, we've never experienced a bear market, We've never experienced rates of inflation that have been this high. Like a lot of folks came into their professional careers seeing a negative inflation rate.

And so it's really important to keep in mind our own lived experiences and how that impacts how we interpret the news and the headlines in our world. Yeah, exactly, Like I became an investor in two thousand seven, and uh so, you know kind of I certainly was an investor while the market was having a moment, was having

you know, while we were going through a recession. But I didn't have like a lump sum that took a big hit, and so it didn't impact me in the same way, uh that as it would have someone who was twenty years older than me and had been investing a whole lot longer. And speaking of just kind of like your personal situation and how that impacts things, Matt, there's actually a way too personally calculate eight the inflation

that you as an individual or seeing. We're going to talk about that and getting to more about how you should be reacting to what's happening when it comes to inflation. Right after this, all right, we are back from the break. We're talking about inflation, and it's true, prices are actually rising. You know, we're seeing prices go up at the grocery store. We're seeing at the gas pump at Kroger specifically, their

prices are really high, at least at the gas pump. Yeah. Uh, Like houses and cars, like they are way more expensive than they were just a year ago. And so across the board we're seeing higher prices. But keep in mind that that's just simply how inflation works, right, Like, this is a part of progress and innovation, This is a part of the growth of our economy. Uh, it would actually be a bad sign if we saw prices dropping

and we were entering into a deflationary environment. That's actually what we saw back in two thousand nine, Jewel, you mentioned that right before the break, how we saw the market tank than but we saw a deflationary environment. In two thousand and nine, inflation was actually at negative point four percent. Uh. And you probably don't need a reminder how difficult it was to land a good job back then. But the big question right now, though, is is inflation

something that you should be paying attention to? You know, how concerned should you be? Uh? And like you said, so much of this comes down to what exactly you are buying, what you're spending your money on. That's right, that's right. And yeah, we're seeing the headline number, the actual percentage rate that is getting up in the high single digits of where inflation is at right now, but

the overall rate of inflation. While it's it's good to know, drilling down to see how inflation is actually impacting you and your family is even more helpful, like seeing what inflation is doing at a personal level. And obviously, if you're a good budger, if you track your expense as well. You can probably run the numbers like Matt, with how much data you have about your own household spending. I'm sure you could figure out that compared to last year,

exactly how much inflation is impact your finances. You can probase you in like twenty minutes, right, that's true. Literally, well, we were talking about something the other day and it was something from like two thousand and eight, and I was able to literally tell you how much I spent on something because I was just like, well, let me pull up the eight budget dot xls excel file and I was able to nerd out and let you know my numbers. It's quite impressive. Also, um, yeah, there's also

my dedication. Also, I need help just beyond the professional help. Yes, but yeah. Interestingly enough, the Wall Street Journal has this like inflation calculator that will link to, which can be helpful if you don't have the numbers, the raw data that Matt has, but you want to see how much inflation is actually impacting you based on how you spend. You can kind of plug some numbers in there. We'll put that in our show notes. For instance, like if you only have one car in that car is an

electric vehicle. Right. The fact that the massive run up in fuel prices is a huge component in the overall rate of inflation, well, that's not affecting you, So your personal rate of inflation is going to be far lower. Also, you know the run up in car prices, We've talked about that on the show, Well, it's made up a

huge aspect of the increased inflation exactly. And if you are like content with the one eight year old car that you have or whatever, like you're not looking to buy a new car, well, inflation is impacting you in a much more minimal way. And so yeah, if you really want to nerd out, you can check out the Bureau of Labor Statistics CPI report, which will link to in the show notes, which goes into a great deal, almost as much detail as Matt's two thousand eight budget.

But I look at those reports and not totally heard out. So yeah, it's it's it's interesting stuff. But it's also important to note that those overall headline numbers are not the necessarily the rate of inflation you are paying, and your rate of inflation could be half of what you're seeing as a headline number, or or maybe less, and so kind of figuring out what it's looking like and

where it's actually impacting you is helpful. Yes, we share all that to help you to realize how big or how little of a deal this is going to have on your finances. Uh. And dude, that's another whole side of this too, is the fact that this is uh an increase in prices, right, And so that means if you are spending your money, like, there's a whole side of our finances that don't have to do with spending.

And hopefully we see that decrease over time as we tend to earn more money over our lifetimes, we'll see the percentage of money that is going towards expenses. We'll see that decrease as we increase our savings rate. Right, But okay, let's talk about what to do. How you can go about not freaking out about inflation because you know the headlines they're not going to stop. And inflation itself could be a more meaningful part of our lives,

and it's been over the past couple of decades. But that doesn't mean that we have to yo yo back and forth with every piece of inflation information that comes our way. And so some of it starts with how

we consume news. This is uh one of these areas where we feel that less can be more, especially if your tendency is to freat more based on your news consumption, and you know, along those lines, I think it can be helpful if you are aware of some definitions, because yes, we are dealing with higher inflation, but we're not talking about hyper inflation, which means a rise in prices to the tune of one thousand percent annually every single year here.

You know, we talked about that after Jack Dorsey tweet a couple of months ago, the former CEO of Twitter, And maybe that's why he stepped down, because I realized he's like, I was a fool. I shouldn't have said that. I can believe that tweet. Um. And you know, we're

also not dealing with stagflation. I feel like that's the term we here thrown around occasionally because that's when you see inflation coupled with slow economic growth and high unemployment, both of which we've seen rebound significantly since the coronavirus

hit last spring. UH. So it's helpful to push back against the fear of inflation just by knowing you know what it is that we're actually living through, just by having some definitions and to realize that we're not working our way through regular inflation to these more exotic forms of inflation or just I don't know, do you just say inflation generally speaking as like the the broader concept that is not what we're dealing with right now, Yeah,

for sure. And so yeah, knowing those definitions, knowing what exactly we're do link with this is helpful. But there are also some practical steps that we can take to to fight back against inflation in our own lives and and to make sure that it isn't, like we said, slowly eroding the value of our money or as is happening right now a little more quickly than it has in the in the best in the previous a few years. But we think it's important to fight fire with fire.

And then and then that evolves pushing for to make more money, uh, pushing for a wage increase. Because of the whack of doodle inflation that we're seeing these days, it hasn't been easier in a long time to negotiate a higher salary or extra perks, Like if you haven't gotten a raise in quite some time, it's time for you to ask your boss to see, like how much

more you can make. And if your employer is offering a normal raise in that two to three percent range that you're used to getting that cost of living adjustment, you gotta push for more. That's just not going to do it right now. And it's it's important to bring your knowledge about inflation and what's happening right now to these conversations and to push back and say, do you realize that's actually that's not even a raise like that you're not even allowing me to keep up with the

increasing costs of goods and services. And so, yeah, if your employer isn't willing to budge on your pay, it's time to do some digging in the job market to see what sort of pay you can command elsewhere, and you can use that as leverage in the negotiation process or mosey on down the road to a new job where you can get paid a decent chunk more. But yeah, finding to make more money is a huge part of how you actually push back against the way inflation is

impacting you and your own personal finances. That's rights another way we can combat inflation is just simply by consuming less, you know, remember the stats that we gave back at

the beginning of the episode. We'll purchasing fewer things overall, and finding ways, you know, just to get the items that you do need, either for free or for you know, or for cheaper is something that we can always get behind, but especially now, um, you know, and so that can be as simple as just making dinner at home, brewing your own coffee. Those are legitimate helpful ways to make inflation hurt your bottom line in a smaller way. By nothing groups. They are in an excellent place to find

things that you want that don't cost a time. Uh Facebook, Marketplace, eBay. These are all great for buying used. Depending on the item, we may not see inflation having as large of an impact on the used marketplace, and so that's just an effective way to stretch your dollar even more. Yeah, the market for local goods in your community via sites like Craigslist or Facebook, marketplace, you're going to in all likelihood, well, one, you're just gonna save money buying used, right, Like, that's

one way to save money. But then on top of that, you might see uh more imperfections in that market, and so you might see someone selling an old couch or something that depending on the age and the wear and tear in the location and how you pick it up, they're they're not charging as much as they potentially could be.

And so yeah, I think there there's just there are more ways for you to save and to combat inflation by buying used and by sticking to some of those sites to buy more of the things that you might have opted to buy new totally on your favorite internet web site swap a offer up, like, there's all these other apps as well that I mean, honestly, like you and I, we don't use all that often because we're

trying to minimize what we're purchasing all together. But there are a lot of different options out there for folks, yes, exactly, And so yeah, another question Matt that comes up for people is about stockpiling, like buying and consuming less stuff.

That's one way to decrease the impact of inflation, But what about the opposite, what about what's known as kind of pulling demand forward and so buying things that you were attempting to hold off on, uh and saying you know what, because of the fear I have about inflation, because of the fact that this item is in all likelihood going to cost more next month, or at least that's my brain's assumption because I'm seeing all these headlines

about inflation. Should I buy that item now? And that's actually, you know, when I refer to that listener on Facebook, that's that's really what she was asking about. Does it make sense to purchase something now assuming that the price is going to go up? And I think the answer to that depends on you know, what the item is, whether or not you can afford it is a huge

is a huge piece of that. You know, don't go into debt in order to secure a small purchase or a medium sized purchase, because then you're paying interest on that item, and that defeats the purpose of saving money on the item. We can pretty much guarantee that the interest that you're gonna pay on an item paying for it with credit is going to be much higher than

the rate of inflation over the next year. Yeah. But but if you have the cash and you're just accelerating a bigger purchase because you want to ensure that you lock in the price that it's at and you don't want to pay more down the road, that's not a terrible idea. We would just say, just don't let the current inflation reality and then you know, future inflation concerns get you too jumpy because that kind of leads to

a cycle for for all of us. If we're buying more, consuming more, Uh, prices are going to go up at a faster rate, and that leads to a more inflationary environment in general. And it's just not good for your personal financial situation to continue to push forward spending to buy things sooner than you otherwise would just because of

inflationary fears. Yeah, it's kind of like options trading. I feel like folks who like to stockpile and hoard might all to overlap with those who might be interested in that. But like, essentially this is kind of like the costco effect, right, That is how a lot of folks are able to get such a good deal at costco. Oftentimes it is

the price, but it's because of the quantity. Uh. And if, of course, if you have a place to store all of those items and you're not going to be tempted to over consume those items, then it could be a good deal for you. Because I think that's another way that we have to be honest with ourselves, is are you gonna be wasteful? Right? Like, just because you have more of a certain product on hand, you need to

be honest with yourself. And uh like, are you going to be more likely to burn through a bunch of paper towels because you've got six rolls of paper towels in your cabinet and it's kind of taken up a bunch of space. Like it makes me think back to I mean even now to a certain extent. I was talking about gas at the beginning of the episode. But when I'm getting close to the e you know, on the on the gas cage, I tend to drive a bit more gingerly, Like I I coast more. I I

don't floor it as often. But Dude, after I fill that tank up, I'm like get in places quickly. It's like, I think I am not wasting time because I know that I've got a full tank. There's something like instinctually human and about that when you have more resources, you're just you're more wasteful. Exactly, when there's more money in your bank account and it's not earmarked for something, you're more likely to like say, screw it, I'm gonna buy that thing now on a whim, even though you haven't

planned on it. Yeah, I I completely there's that psychological component of having I don't know, excess resources, either in your bank account or in your cabinet just depends if you're talking about dry goods from costco or just money in the bank. But we've got a few other ways that we can combat and fight against inflation and its impact on our finances. We'll touch on how investing can help us to fight inflation. We'll get to all that

right after this break. All right, we'll back matt Let's keep talking about inflation and how it's making us a bit uh cuckoo for coco puffs? A bit crazy? Was that? Did you uh eat cocoa pus As a kid, my parents would rarely buy the name brand cereal? Matthew sentiment to crunch for me, man all the way, Give me like that one, a sugar cinnamon, like puffed rice whatever. I'm still nostalgic for all those cereals like if are

we we never have them in our house. We never, But if someone gave me a box, I would eat the mess out of it, that's for sure. Like I remember cinnamon to a scrunch back when they were still serving it up, not in the plastic bag inside, but when it was still like the foil bag. Remember the foil bag. It was kind of like sticky around the top. Nice, I'm getting old. It's a good throwback, all right. Well, let's let's keep talking about inflation and how how to

come about it. And one of the main ways that you can come about inflation in your life is to plan and budget better. So yet, not only should you consume less like we talked about to reduce the impact of inflation, looking to buy used stuff like that, but we also want you to pay special attention to your budget and make changes accordingly. Like in a normal inflationary cycle, Uh, you don't normally have to think as much about changes

to your budget. There there are small little tweaks you can make in order to make sure that you kind of make the numbers work. But as the numbers change, as your grocery store run, or the amount you spend on us every month doesn't stay the same as those prices increase, there are some changes that we have to make to our habits and to our behaviors in order

to kind of continue to live within our means. Uh, But there's also a truth to there's only so much that you can cut back, right, So you're gonna have to adjust your budget to reflect the changing reality on the ground. Because if you don't make any changes to what you're buying and to the amount that you've budget every month, if you're not changing things around and reallocating your resources, chances that you're gonna go over budget just

are going up dramatically. That's right, And I mean and obviously, like the most important thing about budgeting and tracking or spending is to just to be able to have accurate information. Uh. And so it's okay if that amount changes, right, Like, that's that's not like throwing in the towel and admitting defeat or anything like that. But the more accurate those numbers are, the more helpful it will be when it comes to you achieving some of the different financial goals

that you set for yourself. And it touches on, you know, one of the different strategies that I have when it comes to my spending when like we try not to adjust how much we spend towards different categories from your a year, because, like we said earlier, inflation does take place. It is happening in the background, even when it's not in the headlines, and if you are able to maintain a certain level of spending, you are effectively spending less

every single year. Uh. And so that's kind of like one of those little tricks where it's like, oh, my gut's getting bigger, but I'm gonna keep the belts, you know, on the same notch. It feels a little bit tight. Eventually you get to a point to where you're like, all right, this isn't it's either not accurate anymore, or it's actually just impossible to actually contain the growth or

the money that you do want to spend. But again, it's often about having accurate information, and when it comes to your investment portfolio, you want to make sure that you've you know, that you're aware of the impact that higher prices uh will have on your nest egg, not only on your expenses every month, like we just talked about, but also on your retirements. You know, this is an instance where it might make sense to be a little

bit more conservative. You know, this is especially true for retirees. There's been the commonly dispensed four percent rule, which basically states that retiree they should be able to draw down four percent of their portfolio assets every single year. Uh. And if they do that, they'll never outlive their money. But the smart folks over at morning Star, they actually just reassessed and say that it should be more like

a three point three percent draw down rate. Uh. So, yeah, it changed that from point zero four to point zero at three three. And that's based on an assumption that equities are overvalued right now. Uh, and that bond rates will remain low, And so being more conservative is going to make sense in an environment like this. Yes, true, Matt.

But but while we're talking about investing, we would also tell folks, tell our listeners, especially the younger ones who have decades to grow their wealth, to not make massive changes to their investment portfolio because they're worried about inflation. Those are other headlines that you and I are seeing. It's like how to inflation proof your portfolio. And we've talked about this before. We did an episode about inflation.

I don't know, was it like eight ten months ago, and we we talked about how stop are one of the best places to put your money no matter the inflationary environment, and a widely diversified portfolio made up of mostly equities continues to be an excellent way to invest your money even in this environment. So we would say keep investing in the market each and every month, preferably

in those diversified index funds. And uh, Yeah, as we've seen, this inflationary period has actually created more profitability for a whole lot of companies. And so if you own a small piece of the hundreds or thousands of companies in that index fund, you stand to benefit. You're going to see the amount in that retirement accounts continue to go up. And so yeah, generally speaking, investing your money is the

most straightforward way to hedge against inflation. The more you have in savings just sitting there in an account that's getting eroded away, but the money that you have and investments over time is going to healthily combat what's happening with inflation. Yeah, you definitely don't want to have too much money in your savings. Like obviously we like saving money, but hoarding you know, just massive amounts, Uh, within an inflationary environment like this means that your dollars are losing

their spending power more rapidly. You've got to be an investor always, but especially now, don't put that emergency fund money at risk in the market. But at the same time, don't get too conservative and have just massive amounts of money in your savings account. You want to put your money that you don't need set aside in that emergency fund to work, and you know, making small moves like opting just to put some of your discretionary savings and

I bonds that can be a helpful inflation hedge. But you don't want to make just these huge, massive overhauls to your portfolio in an attempt to correct for those higher inflation numbers. Yeah, it's tempting that, I think for people to uh see us, to see one thing happening and then to instinctively knee jerk make a reaction to counterbalance what's happening in one space. And when inflation feels out of control, you feel like you need to get in control and and make a different move. But really,

the traditional way we've talked about investing uh it whole. Yes, it remains true whether you're in a one and a half percent inflationary environment or an eight percent inflationary environment, it's still a great way to continue to invest your money to continue to dollar cost average every two weeks with your paycheck, or or just sticking to your investing plan in general, investing as frequently as you like to do. Yeah, I mean going back to your you know what you

said about your friend that had prostate cancer. It kind of goes back to that. There's this mentality of feeling like we got a mess with stuff. As as soon as you hear something new or you hear something scary like a cancer diagnosis, you think, okay, let's blast it. But in reality that you know in his case that wasn't what he needed to do, and in our case when it comes to investing, and for a lot of people, you don't need to do anything differently. You just keep

doing what you've been doing and ignore the headlines. Yeah, it feels like it's action time, but in reality it's time to like, I don't keep on doing what you've been doing and take very little action. And let's talk about debt to Matt, because that's that's a question that comes up when people are hearing what's happening with inflation. Should it change the way I'm like tackling or paying off my debt? Well, that depends but in some ways.

Actually yes, with low interest right debt? Right, have you been paying off the loan on your house more quickly, maybe hoping to pay it off in twenty years instead of thirty years. Well, if you're fixed, mortgage rate is low in the three percent range. Uh, and it should be after the rates we've been experiencing. If you haven't really financed in the last three years, you probably should that would do it. Yes, but yeah, no, No. Debt obviously,

according to Matt and I is spectacularly awesome. Some debts are better than others. But we don't really love any of them. We don't. We just dislike some less, but some that it just really is less egregious. Some of it even borders on smarts. And your home mortgage is one of those debts that we think should be a low priority for you to pay off, especially with what's currently happening right now. Right, just don't start spending the money that you're putting towards the principle in order to

pay down that mortgage. Quicker we would say invested instead. So, yeah, debt paid down is still something that you should prioritize, especially if it's credit card debt or if it's high interest rate debt, it's still is something we want you

to get rid of as quickly as possible. But if you were, let's say, prioritizing pay down of a debt that's got an astronomically low interest rate, well, in this current inflationary environment, it makes less and less sense to be paying down debt with that money, and it makes more and more sense to continue to invest that money to protect it more against inflation, because guess what, your mortgage interest rate is far below the rate of inflation

is right now, So it's actually like an inflation hedge to to hold on to that. Yeah, yeah, what better hedge is there on inflation over the years than the ability to you know, lock in a fixed expense, in this case, your mortgage, while you can expect to earn more with a higher income and with you know, higher

returns on money that you've got invested. You know, that's that's exactly what happens when you buy a home on a fixed rate mortgage, because I know that the payments I make all my house and all my investment properties aren't gonna go up at all over the next thirty years, but our rent is going to be higher, like twenty years from now, and you can all but guarantee that rents are gonna be higher. Uh, and all the while my payments that I make to the bank aren't going anywhere.

It's the exact same. Yeah, that's exactly right, Mad. Even some of the rental properties you and I have had for just over a decade, for like twelve years, those those properties, like we've seen rents go up quite a bit in that time period, and yet the monthly note on that mortgage hasn't really changed all that much, with the exception of tax increases, right right, That's why we are huge fans of real estate investing. That's right. Yeah, it's another another check mark in the in the box

of why real estate investing is great. But when it comes down to it, Matt, like the you can't stop the perpetual move of inflation, like none of us can in the forward march of time. Yeah yeah, yeah, none of us can turn back time like like share. But the factors like causing inflation, they're just out of our hands, like they're they're far beyond us. It's this it's this world economic thing that that you and I don't have

any influence over than none of us do. And yes, some periods of time we're gonna experience inflation happening more rapidly like we are now. Other times we'll see a more gradual increase of inflation. But your specific rate of inflation it doesn't have to reflect the overall CPI numbers that come out every month and the reports of increased inflation. They don't have to change how we react, or we don't even have to make any changes based on seeing them.

There are are certainly some folks who are more at risk of inflationary shocks than others, but there are ways for all of us to fight back and keep more money in our pockets, even as things feel like they've gone a bit haywire around us. And so what Matt and I really want is is for us to not

freak out, to actually thrive in this inflationary cycle. And honestly, even as the headlines have spelled doom and gloom for everybody when it comes to losing more of our money to inflation, if you have listened to the show and if you have been taking the actions that we have talked about for the last four years, and then we will continue to talk about you. You should have done you.

We must have not incredibly well, because if you've been investing your money in those widely diversified next one so that we've talked about, you've crushed it. You've you have far outpaced the rate of inflation. Your money is in a good spot. And if you've been playing paying down

those high interest rate debts, you're in a good spot. Uh. And so yeah, there there are small tweaks you can make around the edges, but when it comes down to it, the fundamentals that we talked about on the show all the time still apply, and we'll continue to apply in perpetuity, exactly. Man couldn't have said it better myself. Let's go ahead now then and get back to the beer. On this episode, you and I shared a chocolate pecan porter. And this

is my Tim Blore Brewing company out there in California. Joel, we're your thoughts on this one, Okay. So I gotta say I love pecans or pecans however you want to say anything, I was gonna ask you if Okay, So we had Thanksgiving was a few weeks ago. Pecome by? Was that? Was that on the menu? Definitely had a slice of course yes. And some people hate pecan pie, like you either love it or hate it. I think I like it, all right, I was like my favorite. I mean, you can't beat a fresh, you know, hot

out of the oven apple pie. Yeah that's true. That's true. Not super hot because you need it to set up that way. It doesn't just like out onto your plate. But if you wanted to sit up a little bit, but like that, if it's like a little bit warmed with some ice cream, I mean, you can't beat that, all right. If you had to choose pecan or pumpkin, what would you choose? Oh? I feel like pumpkin pie is one of the divisive pies, like people either hate or love that. I'm probably gonna have to give the

edge to pecan pie. Same here over pumpkin pie. But I do love pumpkin pie. Okay, all right, Well you like all the pies? I think I do. Well. Yeah, when it came to this one, you know, I really like pecans, and I thought this one had a nice pecan presence in there. And I've never had like a

chocolate cover pecan. Although like all these cells to chocolate covered almonds, which are delightful and delicious and should always have someone hand to push it over to pecans maybe that would be delicious, maybe because this Yeah, I really like the vibe going on here. The nutty in the chocolate uh inside of a porter was just yeah, really well done, and so yeah, this one was really tasty.

I enjoyed it. Yeah. Yeah, this is one of those reasons why a porter is fantastic because you get all that flavor without having to like chew on your beer, which is oftentimes what you get with a really big style, which can be fun at times, but if you're just looking to enjoy a nice dark beverage here in these colder months, a quarter like this definitely hits the mark. So a big thanks again to Ryan and our friends out there at tim Blore Brewing Company uh for sending

us one our away. And you can actually find a picture of this beer, plus any of the other resources we may have mentioned during this episode, up on our website at how to money dot com. No doubt, all right, Matt, that's gonna do it for this episode. So until next time, Best Friends Out, Best Friends Out,