Tom Mosley:

Inflation and your household budget. For the first time in 40 years or so, we’re having to face inflation, we’re having to deal with inflation, and our pocketbooks are being hurt by it in many ways. I run across a lot of people and they say, “You know, prices are up, but how can I tell? I can’t really tell if inflation is impacting me. I realize that I’m paying more dollars when I go to the grocery store for different things, and I’m spending more on some things, and I realize that if I’m paying an adjustable rate mortgage or an adjustable rate credit card, I’m paying more. But how do I know really if inflation is hurting me?” And then particularly for those of you who are retired, and you’re on, really, a fixed income that you’re paying yourself through your pension or your 401k or your IRAs or your annuities or your social security, you might say, “How do I know if inflation is really impacting me?”

Now, I want you to be very, very careful here, and I want to show you why. Inflation has been called, or I’ll call it, the high blood pressure of financial life. Now, the one thing that I know from having a little bit of a bout, every now and then, with high blood pressure, and the doctor always starts when he talks about, “Your blood pressure’s a little bit up. You might need to get treated for it,” the one thing the doctor always says is, “You won’t feel high blood pressure,” and he calls it a silent killer. And just an encouragement to you, if you’re supposed to be taking a high blood pressure medication, you need to take that on a regular basis because you say, “Well, I took it and I don’t have it anymore.” It’s because you’re taking the medicine, okay? So keep taking the high blood pressure medication. Medical commercial is done, all right?

But inflation is just like high blood pressure is to your physical life, inflation sometimes can be the same to your financial life. It can be killing you and you not really know it. Now, I want to talk to you about what we’re experiencing now because we’ve already gone around the sun one time, and we’re back around to where we were already having inflation last year. I call that stacked inflation. In fact, I should probably coin that term because I’ve been using it for about three weeks, and I was back in New York last week and I had a whole group of people I was talking to and they were all writing down like crazy. They said, “I’ve never heard that term before.” So think about, here’s why I call it stacked inflation, okay? Down in 2022, last year, way back last year in 2022, we had inflation at this time of around 8.5%, okay? This time around, we have inflation in 2023 of, oh, we’re so happy. Inflation is down to 4.9%. Let’s blow out the confetti. Let’s have the party because we’ve defeated or we are knocking a hole in inflation.

Well, maybe. Just remember that this inflation, 4.9%, is 4.9% above that inflation. So if I go all the way back to 2021 when we didn’t really have inflation, or when it was first starting, if I go back to 2021 and I add 8.5 and 4.9 percent, I’m now at 13.4% inflation over two years ago. Those of you who are retired, and you’ve got that set budget that’s coming out, and maybe your financial advisor hasn’t really addressed this issue of inflation because until two years ago, they didn’t know how to spell it, or they didn’t think it was like a major concern at two, two and a half percent. Guess what? At a two-year inflation of 13.4% stacked inflation, it can make a real difference. If you do the math on that, you find that’s about one-eighth, okay? A little bit more than one-eighth or right about one-eighth.

So really, your income that would last 12 months at 13.4% is going to last about until the middle of November rather than until the end of December. The same money will buy the same goods instead of the whole year, two years ago, it’ll buy those same goods and spend the same way up until about November the 15th. So you’re about six weeks short because of a 13.4% stacked inflation in the past two years. You say, “How do I put the cuff on, the blood pressure cuff, and find out if it’s impacting me?” Let me give you two tests to find out. Number one, number one, you need to check your savings. Yesterday in our office, we were talking to a lady and she was talking about one of these two things.

Number one, a lot of people that we’re talking to were asking, “Okay,” because they’ll ask, “Well, how has inflation impacted you?” And they want to talk about the gas pump, which really is about the same it was two years ago. But they’ll want to talk to grocery store, yes, but they’ll say, “But you know, we have about the same amount of money in our checking, spending account.” Here’s my question, “Are your savings going down?” In other words, you’re having to draw money from the reserves to put into the regular spending checking account. That’s one barometer. People, when we’ve asked this question in our conference room, they’ve said, “Oh yeah, our savings are depleting,” and they look at each other like… it’s a silent killer. And the other thing that people are doing, if you don’t have savings put away, are your credit card balances increasing? Because what do we do as Americans if we don’t have the money? Oh, we got a credit card. We got free money there.

But over a period of time, if maybe you’re not able to pay off your balances every month like you used to, or instead of paying down those balances like you at least should, you’re actually seeing those credit card balances going higher and higher and higher, it’s a silent killer. Unlike the federal government, you’re going to have to pay your bills at some point, so you’re going to have to dig yourself out of that. There’s an old saying, “If you’re digging yourself a grave, for God’s sakes, quit digging ’cause you’re just getting deeper and deeper and deeper.” So you need to really try to make some adjustments and maybe cut out some things that you’re not needing or that are optional things. You say, “I really hate to do that.” Right, but I hate for my credit card balances to go sky-high, and I hate for my savings to be completely depleted.

If you want some more help on this, get ahold of us with your questions info@mosleywealthmanagement.com or call us, (714) 421-4288. We’ll answer this question, “Inflation and your household budget, is it hurting you?” and we’ll answer any other question we can. Hey, if you like this podcast, if you like this YouTube, send it to somebody, refer it to somebody. We’d be glad to help them. And somebody out there that you know needs what we just talked about. So pass it along. We’ll see you next time.