Inflation Fighting

Unusual Whales Tweeted out the following.

That is inline with one way we've expressed inflation math before, that with average 3% price inflation, expenses would increase by 50% in 15 years. In a related note, Barron's wrote about harsh Medicare reality (there are some scary nuggets in the comments too).

Do you think your expenses have gone up by 60% in 20 years? Have they gone up more? Maybe less? Very anecdotally, I would say it's pretty lumpy. We (my wife and I) feel price inflation most in the various types of insurances we have. The are all up a ton, way more than 60%. Health insurance of course has gone up an insane amount, just this decade our home owners would have more than quadrupled but we found coverage elsewhere so it has merely tripled. Our various utilities haven't really gone up that much, home heating propane has been floating between $2 and $3/gallon for a long time, gasoline has spent the vast majority of it's time between $2.75 and the high threes in our neck of the woods for a long time too. 

How bad is food inflation? We made some changes to our diet quite a few years ago that would have resulted in our spending more money even if there was zero price inflation for food so I may be out of touch. I realize eggs went crazy, have come back down some but are not where they were. There used to be the saying that there's no getting out of Costco for under $100 and now for us it's $300. Meat from Costco is much more but I don't know if other things have gone down. Healthy food is literally the last thing I would cut back on so if you can add better color in this point, please leave a comment. 

What about healthcare costs? Not insurance but the actual cost of care and medication? According to Grok, the average 60 year old man takes 3-5 medications. According to the NY Times from 2019, people in their 60's take 15 medications. I suspect the real number is in the middle. When we run medical calls, part of the process is to ask what meds they are taking and based on my limited observation, I would say 6-8. 

In trying to find those data points I found something that said someone who takes medication for type 2 diabetes is probably taking meds for 4-5 other conditions. Other than my direct observation, I can't vouch for any of the stats but I think it is common knowledge that we collectively take a lot of different medications and that can be a lot of money.

The way my food expenses have gone up could be considered a form of lifestyle creep. Having to take more medications as you enter your 60's could be another form of lifestyle creep. Both of these differ from the common use of the phrase which usually pertains to trading up houses and cars. 

As people get close to and then into retirement, hopefully the mortgage payment goes away. I realize carrying a mortgage into retirement is far more common now but not having to pay that $1000 or $2000 or whatever each month makes the retirement math much friendlier. An even less predictable variable these days is the extent to which people have to financially support their grown children as they start out on their adults lives. I am not judging even a little bit but this issue clearly is more prevalent than it used to be. 

I am personally motivated to never have another car payment again. A little over a year ago we upgraded to a newer 4Runner from our 2003 without borrowing so we now have the one new car and my old Tundra. Hopefully whenever the Tundra is done we will again able to buy without a loan.

No mortgage and no car payments starting late working years/early retirement years should be able to offset rising prices for other things like insurances, food and wherever else you feel inflation. If you need any work done on your house that is beyond your scope, that will probably be a lot more money.

Circling back now to medications which I harp on, frequently. Getting daily carb consumption down to 50/day or less along with cutting back on boxed processed food from the middle of the store will solve/reverse a lot of metabolic health issues. The list of metabolic health benefits from lifting weights is almost endless. There is no downside to less junk food and there is no downside to better fitness.

How much easier can someone's retirement finances be if they are spending zero on prescriptions? How about simply needing fewer prescriptions? We all know people our own age who can barely move and others who are absolute specimens. The difference between the two in most, not all, cases comes down to habits. 

It's difficult to be confident that price inflation can slowdown anytime soon so opposed to waiting for them to fix it, I would much rather find things that might effect me directly and fix them myself.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.