Today, I read an article about inflation in Forbes online. Google analytics have seen a record high of searches of the word “inflation” as concerns throughout the general population seem to be heightening. The article does a great job of summarizing what has been nagging me for awhile. Are we really supposed to take the Treasury and Fed’s word that this inflation is “Transitory?” As the article mentions, they could do a much better job of explaining why they are not worried and how they would fix the issue if runaway inflation were to take hold. Or is it going to just be In Powell and Yellen we trust?
To give context, I am writing this on the day when motorist in the Southeast are panic buying gas due to the DarkSide attack on the Colonial Pipeline. Florida has just declared a state of emergency due to this. I have a sneaking suspicion that independent of this attack, inflation on gas, food and housing is going to take rampart control of our nation’s economy for some time real quick. I hope Powell and Yellen are right. I hope their plan is going to work. A Battalion Chief on our job gave me some great and funny advice as a new captain. He said “If you’re ever in a situation where your primary tactic is hope, your in a pretty fucked up spot.” Ha ha ha…so what can I do to weather this coming inflationary storm besides hope?
Immediate Actions
When we go to a fire, no matter how large, the number one incident priority after safety is incident stabilization. Using the same analogy, I think having a job that is recession proof is very safe. What is not safe is my wage being subjected to the ravages of inflation. If our grocery bill doubles or triples, we are screwed. If the cost of everything goes up and we don’t get a raise, we are screwed. I have thought of the following immediate changes to my personal finances to adjust accordingly. Hell, this may be a good idea even if widespread inflation doesn’t hit.
Housing: Stop Paying Extra On My Mortgage
We refinanced earlier this year and it saved us a decent amount of money. I have been funneling the extra savings into paying off my principle earlier, but after doing some research, I see this is a terrible thing to do in times of inflation. If I were to betray Kiyosaki and for a moment think of my home as an asset, my return on investment ought to increase if I make just my ordinary monthly payments and my home price were to simultaneously increase with inflation thanks to a fixed rate mortgage. Bam! There’s some extra cash for a cushion…
On The Subject Of Cash…Ditch It
For reference, I’m not talking about giving it away to all of our urban campers that hang out in every nook and cranny downtown. All I am saying is that if inflation runs rampart, cash is not a safe way to store your money. Instead, I will store my money in instruments that have a better stock to flow rating. I’m even thinking of finding a lower cost and reliable precious metal vault. For security reasons, I wouldn’t want to store gold and silver at home, but I like the idea of storing my little wealth in a mix of physical gold and silver as well as a basket of cryptocurrencies that will keep its value in the face of rising inflation. Liquidity and volatility would be concerns to address. My bank accounts will only hold enough to pay the bills. Everything else, I would like to move out to somewhere that will hold its value until I can reengage and invest.
Retirement Savings Shift
I am going to re-balance my future contributions in my retirement accounts to inflation protection assets. Shame on me for not knowing what this fund consists of. It’s on my to do list to learn. I think a 20% allocation from my normal Target Date Retirement Fund will be my starting point. Additionally, I am going to keep maxing out my Roth IRA contributions as the recent talk of raising taxes to support the crazy amount of money printing and government spending makes me think my 401k and deferred comp accounts will be taxed heavily in the future. I currently max out my pre-tax retirement accounts and that can be tailored down for an additional cash cushion if need be to pay the monthly bills.
Eat Healthy For Cheap
Eating healthy is important to our family. With rising healthcare expenses and more importantly a desire to have a happy life and set the example for our kids, this goal makes sense. However, a trip to the grocery store seems to get worse and worse every week. I turn to my backyard for the answer. We already garden and eat from our backyard, but I have never seen this as more of a hobby until last year’s COVID scare and this year’s “Transitory Inflation.” We will invest in and work towards utilizing our garden as a primary source of produce for out family. This year we added three chickens to the mix which ought to save money on the $8 a dozen organic free range habit we go through weekly. My grandparents lived off of a paltry fixed income retirement by living out of their backyard. It might be our solution too. All and all it gets our kids outside and learning about where food comes from. Delicious cheap education!
Plan To Thrive In Sustained Inflation
As firefighters, we take pride in being able to thrive in adverse environments. However, a lot of us see economic hardships in a different light. The whole aim of this blog is to develop a more productive attitude towards what could be a bad situation. It’s time I practice what I preach as a firefighter and apply this mentality towards my finances. The previous section was the defensive operations of my plan. The next ideas are some key STRATEGIES that I will want to follow. I don’t know what exactly I will get into, thus I’m going to keep it to broad strategies.
Keep Your Money Sound
This is in line with my ditch the cash sentiments, but in these potential rocky times ahead, it can’t be stressed enough that cash will erode in purchasing power fast. Every bit of cash earned needs to be converted into sound money and only converted back to fiat (dollar) currency to pay for bills. Better yet, pay the bills and convert as much excess into sound money or investments that yield higher than inflation rates. All sound money will be exchanged for sound investments. Every dollar that I can convert to inflationary resistant investments will make a difference little by little.
Learn The Difference Between Cheap And Having A Low Price
Throw price out the window. Pretend the dollar cost is irrelevant. How do we evaluate what is cheap and what is expensive? It seems to me that big movers in any industry are not getting richer because they have more capital to invest with. Instead they utilize knowledge, which can be obtained relatively cheap, if not for free and use calculated leverage (which today is also next to free) to turn a small amount of capital into a large profit. So I need to figure out what asset I wish to invest in, put in the time to learn all I can, figure out how to evaluate whether or not it is cheap or expensive, buy low and sell high. Easier said than done I know…
Find Cash Flow For Peace Of Mind
There’s the old analogy about the cow being able to bring you wealth. You can milk the cow for years for small profits or you could kill the cow in one fell swoop for a massive profit. If you choose the slaughter route, you now need to find a new cow which takes time and energy. In a crazy market I’d rather enjoy my family than spend countless hours looking to find new opportunities. Cash flowing assets seem to be the way to go, although real estate is super expensive right now by metrics expressed other than price alone. With such limited capital, as of now, I am thinking about going into paper assets and learning the fundamentals of stock options trading. With this knowledge, I can then create passive income flows from stocks I own and take more calculated risks when it comes to speculating on stocks I would like to own someday. Seems like the best of both worlds right now. We shall see.
Focus On Real World Education For My Kids
My kids and my family are my everything. I want them to be happy in this world and I want them to prosper, but I want them to EARN it. I want to teach them about investing and compounding interest and taxes. I want them to know how to thrive in any market conditions so that they can let their resiliency support any dreams they have. I want to show them a path but I want them to take it for themselves. Pipe dream maybe? Right now I’d just kill for my daughter to eat her fruits and vegetables.
This is a snapshot in time for me, thus it’s listed in the My Journey portion of the blog. Consider this a rant, a rough draft, a raw collection of thoughts on how I want to best protect my family from inflation induced poverty. I love my country and I sincerely hope that Powell and Yellen are right on the fact that this upcoming inflation is transitory. The best firefighters are prepared for any emergency they come across. They’ve thought about all options so they can adjust to a rapid change of conditions. Why shouldn’t I take this mentality to my personal finances?
The Firefighter Economist 