Will Inflation Wreck Your Finances? #359

fan of those movies. I feel like there's some of the better ones out there today. But yes, inflation, that is what we're talking about today. We you know, we've touched on inflation before, we've specifically when we've talked about investing. Inflation is a big reason why it is that we we do invest. But we're gonna talk about the ways

that inflation impacts our money today. Different things that the government can do and things that we can do as individuals as well to make sure that inflation doesn't wreck our finances. That's right, Yeah, there are steps you can take to make sure inflation, Uh, isn't you know taking a chunk essentially out of your savings. We'll talk about that today on the show. But before we get to that, Matt, before we talk about inflation, I want to talk about pizza.

Everyone likes pizza. I do. I like pizza more than that like inflation. I'll tell you that, uh, because inflation is like, yeah, we're gonna talk about the good side of inflation too, So yeah that there are some positives. But but pizzas is even better. Even though inflation has, you know, it's it's positive benefits, pizza has, you know, a bigger upside, I would say. But the question I had recently, you know, my wife and I were like talking about whether we should get like two medium pizzas

or two large pizzas. You know, obviously if we get two large pizzas, we're probably gonna have leftovers. And then there's this one place that that I like to get pizza in town. I know you like it too. It has twenty inch pies and so like these are like

extra large pizzas essentially so good. And I was like, Okay, well, now I'm curious what is the the price per per like square inch difference or whatever on pizza and I know that's kind of maybe a nerdy thing to think, but like I want to get I want to give my moneys where these are the kind of things we've we've thought about, dude, and we've had these discussions as well. Specifically, I remember talking to you about the sitting outside of Midway,

which is a local restaurant. And remember we talked about the beer per dollar kind of like the value where like there needs to be an app where you can punch in the quantity of beer, the price of the beer, maybe the A B V as well. That way you can compare apples to apples when it comes to these beers. But yeah, you're talking about doing that now with pizza. Yeah,

I'm still waiting on you to develop that app. But but somebody has developed a calculator when it comes to pizza, and so you can plug in like how many pizzas you're getting, you know, the inch size, the diameter essentially of the pizza, and then you you figure out the price per square inch and so you can figure out, all right, if I'm getting should I get to sixteen

or should I get a twenty inch pizza? Or should I get like you know or Yeah, but it's interesting because it's almost always better from what I can tell, to go with the bigger pizza and then eat the leftovers because you're gonna be paying less money per square inch. But we'll link to that calculator in the show notes.

If you're wondering, you know what, what's the better deals trying to get the medium or the large, and you want to actually run the numbers as opposed to just kind of buy blind faith order to order the medium or large, then yeah, check this calculator. And I know we've got listeners out there who do want to run the numbers. You're nerds just like we are. But it makes me think of all the pizza lately we've been getting the they've got a sixteen inch. Um, it's like

the taking bake. It's like not frozen, it's in the refrigerated section. You take it home, pop in love and it's like the five bucks or the rising Crust. You have five or six bucks. It's really good, dude, we uh we hit that up last Friday. Really really good. Might being over sell dude, No, for the money, you can't beat it for the money. It's not good. It's not great. That plus some greens from from from our

garden some you know some Salgreen's. Uh, that's that's a really cheap Friday night if if you're looking to save some money. We did that last Friday, so sticking good. I was just I don't know, I was just so happy. So they're eating everything. I was like, this was basically free. This pizza costs virtually nothing. I'm the happy man. Yeah, I know. Sometimes I'm willing to sacrifice quality for price, you know, like it doesn't always have to be the

best value. Sometimes you just want the five dollar all the pizza because want pizza and you don't want to spend much money. Yes, it's not. And again it's not like it's they're like the pizza bagel bites or whatever. It's not like tostinos or what is it called, like the ones that used to get like you used to leave or whatever, Like those things are terrible. But when you get it fresh like that and they you know, they haven't been frozen, they're sitting there in the refrigerator section,

I think those are really good. I ate so many of those totinos pizzas in college, and uh, I've grown up since then. I'm matured a little b I'm glad I don't eat those anymore. Matt. Let's move on to the beer. Yes, this one's called be Easy. It's by Monday Night Brewing right down the street. This is a Citra I p A. Looking forward to having this hop

heavy beer on on the show today. Man, Yeah, We've had a lot of different beers from different breweries on the show, but with these last two that we've had on the shows. On Monday's episode, we had that sour and now we're having this I p A. I think with these two beers they easily take the lead on the most number of beers from a specific brewery. But there's a good reason for that, and we'll share our thoughts on this one at the end of the episode.

Sounds good, but for now, let's let's move on to the subject at hand. We're asking the question will inflation wreck your finances? And Matt, as we're like preparing for this episode, I'm trying to think, like, what's a good analogy for inflation, like a pizza analogy. When it comes to no pizza analogy, it made me think of electricity

because I personally don't think about electricity much. I just flipped switch, the lights come on, and I'm happy, right, But what's going on behind the scenes, it would seem is quite complex to get the electricity. You know, all the things I don't understand. It makes me fearful of it. I don't want to mess with electricity exactly. Yeah, that's the one thing I hear a lot of people who are d I y folks. They're like, I'll do anything except for electricity, right, and but like, I'm not going

to go into all the details of how electricity is generated. Uh. Plus, you probably don't know. I don't really know. That's the main reason. Why not because you know, I'm I don't want to go into bore you with all the aplicated details. It's mostly because I don't know them. But yeah, your lights go on percent of the time without fail. But

electricity and inflation have something in common. Neither is something that we talk about all that much, but both are constantly humming in the background, and they affect our everyday lives. And we only really think about either of them when some sort of massive tectonic shift occurs, right like a tree falling down on your power line outside the house. You know, I think it was Halloween this past year, that our power was out for like a day and

a half in our neighborhood. Three different instances where when the power went out and for a bunch of city boys, like that's unheard of, you know, we didn't know what to do with That's true. And then I think the only time you actually think about inflation is when there's like headlines all over the place suggesting that inflation is going to become a major problem. But that begs the question, like is it going to become a major problem and if so, how can we prepare for that possibility in

our own personal financial lives. This episode is going to be like that generator full to the brim of gas, like to help you overcome that power shortage, right, like you actually had a generator. I borrowed your generator when when the lights were off in our neighborhood, uh, for for a timing, because I think my power is out longer than yours. That's right, and it really comes in handy to have something like that. So, yeah, this episode, we're gonna talk about your money and inflation and how

you should be responding. Except okay, so here's the thing. A generator kind of fixes the electricity, and so we're not going to fix inflation. Though it's maybe like maybe I feel like a better way to maybe think about it is like we're kind of like electricians, like we are your electrician friends, but we're in a different state, and so we can't fix your electricity, but we can help you to know what to do maybe what not to do. Yeah, exactly, at least to help you tonight

get electric, cutd right and do this. True, though, inflation worries are seriously making the headlines these days. We've seen commodities shortages, UH, they're causing prices to climb higher. And Warren Buffett he even talked about it at the annual Berkshire Hathaway Meeting. This sheep called me ahead of time. He's like, should I talk about inflation? Joel? I was like, Warren, go for it, dude. Warren and Charles Munger have kind of fallen out of favor with how they're treating bitcoin

these days. True, we won't get into that, um, but he said warm Buffet. He said that inflation is substantial right now and that companies that he owns UH and others that those companies do business with, that they are all raising prices, and this is something we haven't had to even think about in uh in recent years, you know, like this is something that you heard about, like back during the Cold War era, like back in the seventies

and like the eighties inflation top ten percent. Yeah, yeah, we're like, oh, wait, inflation, it's still a real thing, dude, Yeah, it is, uh, And right now it's it's been sitting at roughly like one and a half percent over the last ten years. It's been fairly predictable, pretty low as well. And so because of that, we haven't had to give it much thoughts. But that's clearly changing. Uh, And so that's what we're gonna talk about today, like what's happening

with inflation and how will it impact you? Yeah, but first let's give a definition. Let's talk about what inflation means. And so, Yeah, simply put, inflation is essentially when prices go up, when things cost more, or an even better definition might be when the purchasing power of your currency goes down. So examples of basic inflation could be something like the cost of a postage stamp or a gallon of milk, right, just basic things that we use. Well,

I don't know not we use postage stamps anymore. Let's let's just say you're mailing letters. I have the same booklet of stamps that that I bought like a year ago, and I think I've used like two of them. Actually, you know, the only reason I use them now pretty much is to send Like there's one I R S form that we have to have to mail in like every every quarter for our business. And they require you to mail this form in of course they do. Yeah, that's the I R S. Right. Then there they go.

Not not in the business of customer service, but but yeah, both of those things, uh, postage stamps and gallons of milk cost about more now than they did. And have you ever heard maybe your grandma talked about how she could get a candy bar for nickel or how you know, I don't know, can of coke cost ten cents at bottle of coke I guess back then. Yeah, like you would even see like if you go to like antique stores, it's printed on the bottle. Yeah, like like and you're like,

wait a minute, it used to cost that much. It makes you think about too, like the chips, what's that one brand of tortilla chips in the store, and they literally put the price like printed on the bag of chips, and so they can't actually change the price, Like the stores can't mark it up because it's just printed on there. You know what I'm talking about, Like that white bag of white white corn. It's like it's even more noticeable. I guess if they raise their prices, new price tag

stamped on the bag. But yeah, like even something as big as like a house. Maybe you heard your grandma say, man, but when when I bought my house, I specifically remember talking to my grandma Matt. I swear she in Montana. She bought her house for something right around twenty dollars, and I was kind of like, uh, don't, grandma. I mean, I'm happy for you, grandma, that you paid that that that little amount of money for that home, but also

let's not talk about it anymorecause bumming me out. But yet, the one thing that your grandma doesn't mention in that conversation though, or mind didn't at least, is what the average salary was back then, right, I mean, seventy seven percent of households in nineteen fifty, we're earning less than five thousand dollars a year, and that's a market difference

from what people are today. That's back when a million dollars was like a ton of money, you know, like today millionaires or it's just kind of like, oh, it sounds like everyone's kind of like a millionaire, but but back then that was a rare thing. I mean, not everyone's a million well no, but like there's more millionaires

today then, oh yeah, for sure, for sure. And that's partly because of inflation, right, And and the reason that wages were so low back then and there's so much higher now, well, that's because inflation has been doing this thing behind the scenes, and it's had an impact not just on prices, not just on what you pay for milk or a house or postage stamps, but it's also had an impact on what you're able to earn at

your job. Yeah, that's right, But but how long does it take for inflation to impact the purchasing power of your money? You know? And and that depends on the rate of inflation. And so if inflation is at two percent that's roughly what we've seen in recent years, that will cut the value of your money in half over the course of thirty five years. If we see inflation rates to to let's say three percent, that means your money gets cut in half after just twenty three years.

You bump that up to four percent, that means that you would see the value of your money had in just seventeen years. And and so that's why sticking your money, you know, say, under your mattress or burying it in your backyard is such a bad idea. Uh right, If if you do, inflation is gonna just cause way more harm than the earthworms, maybe even more harm than you not being able to find that money. That the moisture

would be a problem. I know that, like double bagg of double bagget yes, exactly, if you're gonna do that, but yeah, we would suggest you avoid that because inflation is going to be worse for you. But like, yeah, short term or temporary inflation is a legit thing too. That's kind of one of the things that that people are talking about right now. Lumber, for example, has seen traumatic price increases because of the pandemic as supply chain

problems coincided with higher demand. People putting more money into their home because they have been in their home a whole lot more and will lumber prices go back down to pre pandemic prices. We don't really know. That's yet

to be seen. But there is a distinction, I would say, between short term inflation, which is small term disruptions in price over for a particular good or service, and long term inflation, And it can be hard to tell in the moment, like in the here and now, as people are predicting different things, how much of an impact that these short term price bikes are going to have on

like the long term rate of inflation? Yeah, you know, honestly, due this makes me think about like catching a common cold, or or like having allergies, which which I do luckily, I feel like I'm completely out of the woods at

this point, not dealing with my sinus issues. But a lot of folks who reacted to the pollen like I did back in the spring might have been concerned that they had COVID right like they maybe even gone to get tested, because when the symptoms kick in, it's hard to decipher you know, what you are actually dealing with, And so similarly noticeable rising prices might cause us to think that inflation is out of control, right and that it's about to wreck everything, But when it comes to

these shortages, the Federal Reserve cited COVID related disruptions in production and supply chain logistics as the reasons for these shortages in these price spikes, and so this has had a pretty massive impact on everything from you know, building materials to cleaning products and microchips. A bump and prices now or you know, even for the rest of the year doesn't necessarily mean that inflation is spiraling out of control. That's true, but it also doesn't mean that it isn't.

Although that's true, I would tend to believe that it's not, and and maybe some of these issues are more short term that remains to be seen. And luckily there are a lot of really smart economists out there who are who are watching inflation in our country closely. But that doesn't mean that you and I as individuals are completely

off the hook. There are steps that our government can and does take to ensure that inflation doesn't get out of whack, doesn't get out of control, and there are things that we can do as individuals to lessen the negative impacts of inflation on our lives and on our personal finances. Will get to all of that right after this break. All all right, man, we are back to

the right. We're talking about inflation, and specifically we're trying to figure out how to make inflation sexy or tough task right there, buddy, it is, but I have faith and you and me we're gonna do it. Uh. So before we talk about what to do about runaway inflation, you know, on a personal level, let's let's let's make

it clear that inflation isn't necessarily a bad thing. So to you know, you mentioned the kind of electricity metaphor there earlier, to continue that thought from before the break, Proper inflation, just like the proper flow of electricity to your home, that is a good thing. The Federal Reserve wants inflation to happen, at at least within reason, and that's partly because following prices actually incentivized consumers to hold off on purchases, waiting for prices to fall even further,

which harms the economy even more. Yeah. If I know that the price uh that tesla is going to in all likelihood fall by a few thousand dollars, like I'm just gonna keep keep waiting keep the bank. Why would you spend that money now when you know you can spend less a little bit later down the road. Right. So that's the theory from British economist John Maynard Keynes anyway. But the problem is when inflation ramps up and speeds

out of control. Uh, just like a surge of electricity to your household electronics, that's when things get fried, and that's when things don't work like they're supposed to. The proper flow is good. Spikes and swings in electricity, that's bad news, that's true. So I think it is too really important to mention that this is one of those areas where a lot of really smart people disagree. Some people, you know, think that inflation is bound to become a

major issue in the years to come. They're almost convinced of it. And others believe that it's not in all likelihood going to be much of concern, and that there are ways to fight inflation if it gets too out of control. You know. And Matt and I are not economists, Like we're not making any predictions here, Just I just want to like say that too, we're not gonna like inflation is all and not likelihood gonna happen at a

rate of three point two percent this year. Like, we're not making any predictions like that, but let's talk about, Matt some of the tools in the tool belt of the federal government to combat inflation when they need to. Another reason I think that that some are concerned that inflation will ramp up is is because of government spending. Actually due to the trillions of dollars that the government has spent to combat the effects of COVID, especially putting

more money into the pockets of individuals. You know, more money to spend means people are spending more, and prices often go up in tandem. The more money that's in circulation, that decreases the value of the money that's already there. Man, it's right. Yeah, So this is one of the reasons that people are worried that the economy is overheating. Like we've never actually seen government spending like this before, especially

direct payments to individuals. Mp Are actually said it well, I think, and they helped put that massive amount of money in context. They said, if the amount of money that the federal government spent fighting COVID, if that amount alone were the GDP of any nation, that nation would have the fourth or fifth fifth largest economy in the world. This past year's insane. Yeah, so obviously, Yeah, putting that in context, that's a ton of money that was spent

in those few bills alone. So we are seeing things heat up, and different economists and Federal Reserve officials are expecting the surge in prices. But if the search continues for more than a few months, then that might be a reason for concern and for yes, some fiscal policy and some intervention. Yeah, it's okay to see things heating up a little bit, right, I mean, think about where

things have been since last March. Right, not not March this year, but March last year, when things completely came to a grinding halt. And so to see things pick up, yeah, it's it's okay to see the consumer price index, to see inflation rise slightly. We just want to make sure it doesn't last for too long. But you know, once inflation is at a level that's too high, of course, if and whenever that might occur, that's when the government

will step in. If inflation spikes, then a step that the Federal Reserve could could take would be to raise interest rates in order to slow down the economy. So, for example, the higher the interest rates are. If someone was thinking that they might buy a new car and finance it, and well, you know they might be less likely to do so because of the higher cost of financing.

And simultaneously, if if rates are higher, uh, and banks are paying a higher interest rate to their customers and their savings accounts, well, folks are going to be incentivized to save their money, like why would I spend it? Right, just like you were saying, if you're expecting prices to go down, well, why would you spend it down? Because I can pay less for that thing later. The same thing is true here. If rates are high and I can hang on to the money, well, I'm incentivized to

save that money. And so this slows things down. That's when there's less money flowing around the economy, and that cool things down. Yeah, And and generally speaking, there's basically an inverse relationship between interest rates and the rate of inflation, just like you're talking about, Matt. So Like a counter example or scenario is like when the economy is slowing down or when it's kind of stalled out because of the pandemic, the Federal Reserve will lower their benchmark interest rate,

or like they did last March. They'll drop it all the way to zero and not just lower it, but just like slam it, just like completely down exactly exactly. And so this has an impact on interest rates the banks are offering. That's why we've seen such pitiful interest rates when it comes to your savings accounts. Those have plunged over the past year, much to the chagrin of many of our listeners who enjoy saving their money. It's also a part of why we've seen historically low mortgage

rates over the past year. You know, banks aren't paying much in savings accounts, but they're also not charging a ton for mortgage loans. So yeah, these are These are kind of some of the inner workings some of the ways that the rate of inflation kind of affects, you know, our savings rate, borrowing rates, and just kind of how

we approach our personal finances in general. Yeah. Yeah, low inflation is good if you're looking to take out a mortgage on the new home, but it's bad if you're looking to build up that nest egg in order to secure that mortgage, right, uh, and so this is just all a part of how the central banks manipulate the supply and demand of money in order to keep the

economy moving along at a reasonable expected rate of inflation. Right, But you know, don't expect higher interest rates anytime soon because we're actually below the targeted two percent inflation rate that the Fed is set. That the Federal Reserve has made it clear that they're not going to raise rates interest rates their benchmark rate until the inflation rate is ats or above its target rate for a while, which is why they've said it might be sometimes three maybe

early before they make any moves there. And so the rates of inflation is definitely increasing compared to where it's been because things are warming up, like you know, like it almost feels like we're kind of back to the before times, Joel, or spending money like we used to. But the inflation rate currently is not too high, at

least not yet. Yeah. I think one of the other interesting things about inflation is, you know, we just talked about how the government, uh, their their role in the Federal Reserves role when it comes to inflation and kind of attacking it if things get too crazy two out of hand when it comes to inflation, or you know, prodding the economy and trying to accelerate things and accelerate

the rate of inflation if things stall out. But now let's talk about how we should think about inflation as individuals, because you know, this is how the money. We want to talk about your personal finances when it comes to this giant broad economic topics. Right, And so even as prices continue to rise, that doesn't mean that everything will cost more. For instance, Matt, I think one of the most fascinating things is we just assume rate of inflation,

everything that we buy is going to cost more. And that might be frustrating. There might be like kind of annoying thing to hear, maybe a little depressing. It's like, oh, my gosh, everything is gonna cost more. But not quite true. Because let's take for example, computers. They cost a whole lot less than they did twenty years ago. Technological improvements are actually a way that our dollars go further, and inflation affects us less than we might think that it does.

In fact, Matt, everybody out there listening is probably listening to this show on their super smart computer that's in their pocket, their smartphone, right, And like they said that, like the computing power that's in our smartphones right now, could you know, take a like the Apolomossian to the moon. I'm like, I wouldn't doubt it, yes, But instead, you know, we're using it to play Kenny Crush things like that. And well, and I think too about all the other

things maybe that we that we used to buy. That just a bunch of items we used to have in our house and we don't have any need for any longer because we have a smartphone. Like, the smartphone replaces just a ton of gadgets. It's like the Swiss army knife tool at this point, Like you don't have to have a flashlight or a calculator on hand anymore, or an iPod or a video camera. I mean, there's so many different things that your smartphone does that you used

to have all these other gadgets for. And so, yeah, it's interesting to note how technological progress actually helps us when it comes to inflation, so that we're not seeing literally two percent of our dollars eroded every single year, basically, even as inflation marches continually higher. That kind of progress really does stem the tide in some ways at least. Yeah, having a healthy, steady rate of inflation is a good thing. Right, that's what we're kind of hoping for, but it's not everything.

There are other factors that we need to kind of step back and you know, pull our noses out of the book about inflation and realize that there are other things that affect our lives and the price of things. And you know, like we mentioned inflation affects wages as well. That that mostly lame cost of living increase that you get from your employer always annoyed me. It kind of

feels like a joke. But because inflation has been so low over the past and years like that, that twenty little raise is actually enough for your pay to slightly outpace the price increases of most goods and services each year. And so like, while your pay would ideally outpace inflation significantly,

that cost of living an increase is actually important. Uh And since nineteen fifty, prices are up around one thousand percent, but the median household income is actually up closer to twenty uh So there's a massive difference between what folks are earning these days compared to the new cost of goods. Yeah, overall, the standard of living has increased dramatically in our country right in the past seventy years. Just the idea that you can have a decent smartphone for a hundred bucks

and monthly service for fifteen dollars a month. Like, it's it's incredible compared to I think, you know, our our grandparents. If you actually like talk to them about what it was like to live in the nineteen fifties, they might not love all the new technology, they might not be on TikTok right, but they're at least going to be able to admit that it's pretty crazy, Like the amount of goods and serve this is that we have at our disposal, and how inexpensive some of the most important

ones to us actually are. So Yeah, while the cost of living wage increases, uh that you just mentioned Matt there, you know, can sometimes be a bummer. It's nice to know that they're actually helping us, you know, keep up with the rate of inflation and technological progress. You know, that's another thing that affects us more directly than what

the government does. But there are specific things that we have direct control over ways that we should be using our money now to combat the effects of inflation, especially if inflation begins to tick up. We'll get to our thoughts on that right after this. All right, dude, we are back here. You know, up until now we've we've been talking about inflation and the ways that it affects us, But we also don't have a whole lot of control over what Jerome Powell does with you know, over at

the Federal Reserve. Like we don't mean you don't I got a direct line to a cell phone. You always say that, like you've got everyone's cell phone number. I can always connections that you don't know about. Nobody believes you if you're going to constantly be crying Warren Buffett, or if you're constantly crying your own pal, I don't know any of them. But here's the thing. You know, we do have control over what we do with our own dollars. Uh, And so what can you do about inflation?

That is an important question to ask, so that you know, no matter what we see happen with inflation in the coming months and in the coming years, that it doesn't hurt you in a significant way. And the first thing that we're just always gonna recommend for folks to do when it comes to their own personal finances and inflation is to make sure that they are investing their money.

We want to make sure that folks are investing more their money, and we want folks to understand too that investing is not the same thing as saving their money. I think it can be easy for some individuals to think, well, I'm not buying that test ledgule, like you mentioned earlier, I'm taking that money. I'm being responsible. It's sitting there in my checking account, sitting there in my savings account.

But we're here to make sure that folks understand that investing is uh such a better thing to do than just saving your money. Because right well, obviously, like you do need an emergency fund, you need liquid funds in the bank. But if you avoid investing, dude, inflation is going to eat you alive over the years, and it's going to hurt the value of your dollars in a

big way. The main reason to start investing is to build wealth, right but even before that, the first goal of investing is to make sure that you're beating inflation and to avoid seeing your wealth get destroyed through inactivity, through it just sitting there in your savings or your

checking account. And so if you're too scared to invest and you're only willing to put money in a savings account, You're gonna end up in a really difficult position, and that's not what we want for our listeners here at how the money, That's what I think. The same thing is true when it comes to like working out. Your first goal is just to kind of keep your body from deteriorating. You know what I'm saying, just to keep you alive. If I just do like twenty push ups

a day, I can maybe keep myself. And yeah, I'm not gonna get like the rock buff, but at least I'm not going to get ridiculously weak. And I think you're not gonna injure yourself. Hopefully it means that your body won't go negative. And yeah, so I think it's the same thing with investing your right, Matt, that the first step is to beat inflation, and then wealth generation

is the inevitable consequence of continuing to invest. And I think one thing that we need to talk about when it comes to investing a lot of people and you're gonna see more and more headlines touting this will say that gold is the best hedge against inflation, and you're just gonna see a lot of folks pointing to the fact that you should be putting more of your funds

in gold as inflation starts to heat up. But yeah, gold can be risky and it's not as good of an inflation hedge as some people make it out to be if you're invested for the long haul. If you're investing for the next ten years, we still think and based on historic returns to that sticking mostly with stocks is your best bet. If you're looking for more short term protection, putting your money in I bonds is a worthwhile place to go. So are tips, which are treasury

inflation protected securities. Both of these products are based on or linked to the inflation rates, and those are decent vehicles if you're really concerned with inflation. But still, the best way to outpace inflation with your dollars is to invest and invest heavily in the stock market. Yep. And you know, generally speaking, we're not fans of gold. Uh, we're not fans. I mean, if you want to give me some, I'll take it, Yes, I'll take it as well.

But investing in gold now, yeah, and I mean especially physical gold as well, because then you have to get like a lock box at the bank or something like that. And that's just an inconvenience, Like I don't even want to go to the post office right, like dot com when we're talking about the stamps earlier, and so investing, that's one thing that you can do to make sure that you are fighting inflation. Housing, dude, Like, that's another

good hedge against inflation as well. Uh, primary residences are the number one financial asset that most Americans have. We we kind of wish that this wasn't the case. We'd love for more Americans to be investing so much money that therefore, oh, one K was actually worth more than the equity of their home. But oh yeah, alas that is not the case. However, the rising values of homes have beat out inflation, and since the nineteen sixties, homes have risen on average four pc annually, And so that's

a that is good news for homeowners. And another thing too, low interest rate debt, like having a thirty year mortgage in the low range that they're you know that it's currently at now like around three This can actually be beneficial when it comes to combating the effects of inflation on your finances. Yeah, man, that that's because like your monthly mortgage is locked in while inflation continues to march.

So like, yeah, you get that thirty year mortgage and your monthly mortgage payment is a thousand dollars a month. Ten years from now, a thousand dollars a month. It looks like a pretty cheap, you know, monthly amount to be paying right now. It might not seem as ideal as you would like, but later on down the road, as prices continue to rise, having locked that in is going to be really really nice, right And you shouldn't typically buy a home for just financial reasons, like homes

are not a great investment. A better reason to buy a home is for the impact that it's going to have on your lifestyle. That you want to put down roots. You know, you want to you know, join that community and you want to stay there for a long time. You want to paint the walls the color that you want them. Yeah, an orange wall in one of our homes and get turquoise office. We kind of stopped using

the crazy colors so recently, Um, yeah, bring it back, dude. Maybe, I don't know, I'll think about it all the different colors. Haven't we seen that as a trend as folks are leaving lockdown, like folks are kind of embracing like vibrancy and life and just different colors. Well, no one wants the draft, you know, grays and whites and blacks anymore, even though that's like half my wardrobe personally. It actually all the all the house, all the walls in our

house are all those colors as well. Well. I think the reason that we opted to stop going with the insane wall colors was so that our artwork could actually stand out because our artworks a little daney and a little colorful, and yeah, having a more reserved art color actually helps those popping that's on, Yeah, like a gallery wall,

that's right. But yeah, in effect, because of inflation, it feels like your monthly mortgage payment is even shrinking even though it's staying the same when you own that home. So if you own a home, it's a solid hedge against potential inflation increases. If you're particularly worried about inflation, owning a home is one way to kind of weather any potential inflation storm that comes up. Yeah, it's definitely a benefit. Like and again, we wouldn't recommend folks to

purchase a home, and specifically as an inflation hedge. Like there are so many other factors to consider, specifically, if if fits your lifestyle. You know, if you want to be in a home, and how long you're going to be in the home, you need to make sure that you're going there at least five years, if not more, to make sure that it's worth it for you. But that is a benefit for sure in a way that

you can beat inflation. Another thing you can do too is to prioritize eliminating high and straight debts, especially debt that comes with variable interest rates. If we do begin to see inflation become a more meaningful issue, it will likely affect the interest rate that you pay on debts like credit cards and he locks. Uh. Those rates might be low now, but if inflation kicks into a higher gear, they won't stay low for long. And so if you've let that debt, linger work to get rid of it now.

So generally speaking, uh, yeah, inflation kind of it's bad for your variable rate debt that you might have, but it's good for your savings. Uh. And it's good too if you have that that really low fixed rate debt like a mortgage. Yeah. And one other reaction you should have in all likelihood to inflation. One way to protect your personal finances is to get on a budget and

then adapted accordingly. Basically, if you're trying to live on the same budget numbers that you were from two thousand and eleven, from ten years ago, I bet you're having a tough time because prices have gone up. Like, even though inflation has been low, we have seen price increases over the last ten years on everything from you know, what you pay for cars, car insurance, milk stamps of course, right like all those things. Be craft beer definitely has

gone up. It's definitely. I'm actually really curious to look back at the craft beer prices from yeah, ten years ago. But here's the thing, it's not apples to apples because the quality of the craft beer has definitely gone up in the past ten years. You know what, I know it, The whole world knows it, the American people know it. We all know it. Right Yeah, So so yeah, like, obviously you're not gonna be able to to live well on the budget that you created ten twenty years ago.

You need to update your budget, and you need to update it as prices shift. And we're not talking like incremental small changes on a monthly basis, but double checking your budget once a year to make sure that you can still get by on that gas or grocery budget is crucial. Like, you know, if you've noticed your grocery bills start to creep up, or if obviously gas prices have definitely gone up. If you're like I drive the same amount of miles, I can't cut how much I'm driving.

My budget needs to increase accordingly, and I might need to cut back in another place so that my budget still works. Will do that. But having a budget that works for the reality of the prices that exist is is really important. Yeah, dude, you know, And as prices have gone up, there are ways though that we can kind of make these changes to our budgets to make sure that we are still on a budget and making sure that our dollars are going the distance that we

wanted to. You know, one of the things you can do is you can substitute to purchase that you might normally make with something similar that hasn't, say, gone up in price to the same degree. So, for instance, if you like rib By, uh, maybe the prices everybody have gone up. Uh. What you can do instead is instead eat like a cheaper cut of meat. Uh. Instead, maybe you can be looking at that that skirt steak, although I think skirt staate is pretty expensive too because it's

kind of a lot of people like it. Now maybe you go, yeah, but but then is it even worth getting? That's true. So that's one of the things you can do. Or obviously too, you can just cut it all together. You can just do without and so for instance, just skip it all together, like just eliminate that meat from your diet. I'm just eating Spanish now exactly. Yeah. Yeah, and so yeah, like we said, inflation will hit some categories harder than others, but just be aware and be

willing to shift your your your buying accordingly. Uh. And I just want to point out in highlight too that like we're not talking about just every year increasing all of the different categories in your budget by two percent or whatever the inflation rate is that you know for

that year. Instead, we want you to reflect on your budget and and just look at maybe areas that went slightly over and if those are areas that means something to you, did you gain a lot of value from those categories of spending, then that's when you want to make sure that you increase that a little bit. You don't want to be constantly in the state of feeling like you are failing your budget, right, because that would

feel maybe a little defeatist. But dude, honestly, I I really do like the fact that every year, assuming let's just say that, you know, the inflation rates at two percent, that our money buys us a little bit less, assuming that your wages are moving up in accordance with inflation, but you're spending, if you're kind of locked into like

maybe the previous year spending. I like how there's this this natural tightening of the belt that takes place, and it takes you being intentionally proactive to say, Okay, now I am I'm going to choose to spend a little bit more. It's one of the rare instances I feel like in life where if you stick with a certain dollar amount, that's actually gonna mean more money in your

account at the end of the day. Does that make sense. Yeah, It's almost like a behavioral thing that you're not thinking about. You're like, well, I guess I'll just keep the saying budget from last year. Yeah, without realizing that it's behind you a little bit less and therefore you're actually kind of saving a little bit more. Yeah. I like that. It's it's kind of like, yeah, a little psychological trick probably having to be just a little more intentional and

thin grow story. Yeah, yeah, yeah, yeah, And Matt, I think it does remain to be seen whether inflation is going to have a major impact on our economy and on our personal finances in the coming years. There's definitely no solid information right now where we can be like, Yep, it's gonna it's gonna mess you up in a big way, and you definitely need to be taking this, this and this step. But hopefully we outlined enough steps so you

can be prepared for inflation. And you know what, even if inflation doesn't get out of control, inflation is a constant, right, and so there are steps we need to take anyway, no matter the rate of inflation and what the future holds. Yeah, and and hopefully to again even if runaway inflation isn't a massive problem like later this year or next year, in the future, it's just important to understand how inflation works.

Kind of like when we were talking about electricity as as a metaphor, when you understand something it becomes a whole lot less scary, right, And so that's the whole point of this episode is that kind of shine a light on how it works, to realize it's there, uh, to realize that it can provide a lot of good for our economy, and then it likely shouldn't be something that you're scared of. It's something that you need to

treat with respect. Uh. In that like what parents always say about certain tools that are like dangerous, Like we need t shirts to say respect the inflation. That would be amazing. But yeah, it's it's something you don't need to be scared of though, And oftentimes the headlines that we see in the news are are often just overhyped. Yeah, yeah,

I think exactly. I think it's one of the things that we want people to take away from this episode two is to not freak out too much about all the inflation prognostications that are flying around these days, all

the headlines that are like, inflation is gonna mess you up. Like, it is true that inflation might have more of an impact on our dollars in the coming years, but there's a lot that you can do to be prepared and in all likelihood that inflation of prices is going to mean inflation in wages, and so inflation is something we do need to know about, but it's not something we need to be scared of, all right, Matt, Let's move back to the beer. Today on the show, we drank

a beer called be Easy. It's a double I p A a Citra I p A by the good folks at Money Night. What were your thoughts on this beer? Man? Yeah? Not surprisingly, this is a double New England I p A. So as we poured it nice and hazy, basically looked like orange juice, and dude, it was a total juice bomb, so delicious in my opinion. It had the right amount of hot bitterness. It kind of had that herbal nature going on, with the right amount of sweetness as well.

There's no surprise that I really like this one. And uh yeah, what are your thoughts? I'm just going to guess that you also liked it? Also like this beer? Yes, somehow a lot. It's start having beers on that we don't like, just just you know, I think folks want to hear us complain about something because we don't. We don't often complain about the beers, but we have on the show because I mean we were like craft beer. Yeah.

We literally got an email from somebody one time and they're like, there's no way you like all the beers you have, and like, well, no, we hand picked most of them, and so sometimes we do. I look at the on tap ratings and like when people send us bears, Yeah, usually we like them too because we like craft beer and people know, you know, the kind of stuff we like. But um, yeah, this was another really good one. I

think what's fun about this beer? I love to get the try every once in a while a single hop p A. Yeah, like most I p A s are this medley of like four or five six different varieties kind of used together to make that beer. But with this beer, you get like an in depth treatment to like the Citra hop and yeah, I really enjoy I think Citra hop is one of my favorites. Sometimes it can be a little juicy and it can be a little one note, but whatever they did with this beer,

it had a bunch going on. It was still delicious. So yeah, this is probably one of the best single hop I p A s I've ever had. Yeah, and specifically to this one was Brooding Partnership with Bottle Share, which is a kind of it's a nonprofit that folks who are in the craft beer industry that if they remember, uh, those I guess those funds or you know, money that they pay into it goes towards folks who have faced

something really difficult in their life. And so I assume that a part of this specific beer actually went into that nonprofit, which is a really good thing as well. And so I'm glad that that's something that you and I could be a part of in a very small way by sharing this one here on the show. Joel, that's the best thing when you buy beer and it helps somebody, of course, I mean, uh, but yeah, man, that's gonna be it for the episode. Listeners can find our show notes up on our website at how to

money dot com. Yeah, and if you're still confused about inflation or maybe you've got some additional questions, we'd love to to hear them. And actually you can send in a voice memo and we can take that question on an upcoming ask htm episode. Just go to how the Money dot com slash ask simple instructions there for you to submit your voice question and we can take it

on an upcoming episode. We did our best, but we might not have knocked at the park well, and we didn't dive another things too that maybe we wanted to, like like m M T right, modern monetary theory, Like there's all sorts of things when it comes to inflation that we didn't really touch on because we didn't want

to get too nerdy with it. But it's political too, because sometimes that's that's true, yeah, but but it's things that we find interesting and so I feel like listener questions are a way to kind of do a deep dive. It does something that we wouldn't normally spend in an entire episode talking about. But inflation, dude, it's so essential, and it's good to make sure that we're all on the same page moving forward and that folks understand it

as well. Yeah for sure. All right, So thanks for listening and until next time, best friends, best friends out, M M.