Defeating_Inflation
00:00:00.000 | Hello everybody, it's Sam and Sydney from Financial Samurai and in this episode we want to talk about combating inflation and some novel ideas
00:00:07.880 | on how to do so.
00:00:09.840 | Also, thanks to everyone who left a really positive five-star review with commentary for this podcast. Really appreciate it.
00:00:17.180 | I had mentioned in my newsletter at FinancialSamurai.com/news that I would be taking a break from
00:00:24.900 | podcasting until the reviews got to over 400 because I'm trying to do load management.
00:00:30.680 | If you've ever watched NFL or NBA games,
00:00:33.320 | they have this term called load management where they don't play their players all the time because it's a long season and they want their
00:00:39.700 | bodies to heal and to be ready for the playoffs. So thank you very much.
00:00:44.600 | These reviews keep us going and keep us motivated. We don't have any sponsors.
00:00:49.740 | We just like to share our thoughts and also like to share some of your thoughts as well.
00:00:54.600 | So without further ado, we want to talk about inflation because inflation is the topic du jour
00:01:00.320 | that the government is really trying to squash. The Fed is so determined to squash inflation
00:01:06.920 | that it's likely to keep on raising the Fed funds rate, maybe until 5.25 to 5.5%
00:01:13.600 | mid-2023.
00:01:16.320 | There was hope that they'd stop by 5%, that they'd start cutting by the end of 2023,
00:01:23.400 | but I think that hope is all lost because of the strong inflationary data in January.
00:01:29.480 | So I thought, well, why not write a post about how to combat inflation and also share with you
00:01:35.760 | some reader commentary on how they're combating inflation and
00:01:39.560 | also
00:01:41.280 | talk about this issue about us being tone-deaf
00:01:44.440 | about how straightforward it is to combat inflation, but
00:01:49.520 | highlighting that it's not easy and it's different for all of us.
00:01:53.140 | To start off, the latest inflationary numbers for January 2023 came in at 6.4%.
00:01:59.180 | Now that's down from mid-2022, peak level of 8.9%.
00:02:05.540 | And I wanted to highlight
00:02:07.940 | the inflationary changes, the price changes of consumer goods and services since
00:02:12.580 | 2000. And the goods and services that inflated the most are
00:02:19.140 | hospital services up something like 230%,
00:02:22.100 | college tuition and fees up about
00:02:25.940 | 170%, college textbooks up about
00:02:29.340 | 155%,
00:02:31.860 | medical care services up about 140%,
00:02:35.380 | child care up about
00:02:38.540 | 120%,
00:02:40.700 | food and beverage up about
00:02:42.780 | 75%,
00:02:45.420 | housing up about 70%,
00:02:48.260 | new cars up about
00:02:50.540 | 20%, household furnishing up about 17%, and
00:02:56.140 | clothing about flat. Now since the year 2000,
00:02:59.940 | here are the items that declined in prices. Cell phone services, software,
00:03:05.580 | toys, and televisions.
00:03:08.300 | So if we want to combat inflation, it's pretty straightforward, right?
00:03:13.620 | We can decide not to go to college or attend community college or a state school like my wife and I did.
00:03:20.820 | We can stay in great physical and mental shape to decrease our chances of receiving medical services.
00:03:27.300 | We can eat less and/or
00:03:30.100 | substitute cheaper foods. This is a very contentious
00:03:34.140 | topic. I think people are offended by this in particular
00:03:38.060 | for the idea of eating less for some reason, but that is obviously a straightforward way
00:03:43.460 | to not feel as much brunt on food inflation.
00:03:46.700 | We can decide not to buy new cars because the average new car price is almost
00:03:51.140 | $50,000 now, which is crazy compared to the median household income of about
00:03:56.660 | $75,000 today.
00:03:59.340 | We can also drive our existing cars for as long as possible, or we can take public transportation more.
00:04:05.420 | We can decide not to have kids or have fewer kids.
00:04:10.140 | We can buy a house with a fixed-rate mortgage, and we can own stocks and other risk assets that tend to increase in price
00:04:17.900 | faster than the rate of inflation. Of course, not all of you will completely agree with all the above listed items to combat
00:04:26.540 | inflation. I suspect some of you may balk at not going to college or going to state school like we did,
00:04:33.200 | eating less and not having kids the most.
00:04:36.380 | Further, if you have kids already, it's not like you can just return them.
00:04:40.340 | Hence, let's discuss in a little more detail about the items and strategies to help save money.
00:04:47.100 | We all have different opinions.
00:04:48.820 | We must weigh the costs and benefits of each compared to the clear benefits of saving money, and that's why I say in the title,
00:04:56.620 | it's straightforward to combat inflation, but it's not easy because of human nature.
00:05:02.380 | The more we desire to save money, I think the more we will agree that the above strategies will help.
00:05:09.500 | And the less we desire to save money, I think the less we will agree. Let's start off with college.
00:05:14.580 | Personally, I believe
00:05:17.060 | college is crazy expensive now, given everything can be learned online for free. So why is it that college tuition is
00:05:24.140 | inflating faster than headline inflation? It makes no sense to me. There are more administrators than college professors.
00:05:31.780 | What is going on, folks? Part of the reason why I'm recording Financial Samurai
00:05:37.100 | podcast and writing on Financial Samurai and doing the newsletters is to provide as much free education based on firsthand
00:05:44.260 | experience as possible. I strongly believe if you listen to this podcast regularly and read the newsletters and read the posts,
00:05:50.780 | you're gonna be more financially educated than 99% of the population.
00:05:53.820 | Yet, tuition costs still keep on
00:05:58.540 | climbing so much and it just seems like there's a problem. What are your thoughts on going to college,
00:06:04.020 | not going to college to save money, or going to state school or community college, Sydney?
00:06:08.180 | Times are changing and costs are just out of control.
00:06:11.220 | So I think it makes sense for people to look at more options today, such as trade school or junior college or just
00:06:19.020 | skipping college altogether and utilizing online resources. We've had discussions ourselves about whether or not
00:06:27.580 | we want our kids to continue on the traditional path or if we want to
00:06:31.940 | switch them back to homeschool at some point. What do you think? I think homeschool is pretty elucidating.
00:06:40.020 | There's something interesting that happened the other day. I asked our son as I do
00:06:44.300 | every single time I pick him up and drive 20 minutes back home. What did you learn today in school?
00:06:50.220 | I forced him to tell me one thing to justify the cost of his tuition and he said, you know, I read
00:06:57.220 | Brown Bear, Brown Bear. And then he talked about, you know, we learned about octagons.
00:07:01.940 | And I told him, didn't we learn this like two years ago when we were homeschooling you? And he goes, yeah, we did.
00:07:09.020 | I was like, ah,
00:07:11.220 | interesting. So the efficiency of homeschooling is much higher than regular schooling.
00:07:16.300 | I really believe you can teach two to three times more homeschooling. You know, when I was growing up,
00:07:21.420 | I would always wonder how do these kids graduate high school at 14 years old?
00:07:24.900 | How do they graduate college at 18 years old? It's because a lot of them were homeschooled and they had supplemental
00:07:30.900 | education from their parents or tutors and then they just skipped grades.
00:07:34.820 | And so what I realized from this also is that you and I are educated, college educated. I got my master's degree as well.
00:07:42.380 | Why don't we just teach our children everything we know and
00:07:47.540 | if they know everything we know, then they should be able to do our jobs,
00:07:52.700 | which means that they should be able to earn money. And if we can't teach them everything we know,
00:07:57.460 | then what did we really learn in college? And maybe we need to spend more time with them.
00:08:03.020 | Instead of just spending five hundred thousand and fifteen years to send them to college, which sounds crazy,
00:08:08.980 | why don't we just spend more time teaching them? For example, I graduated from the College of William & Mary.
00:08:15.780 | It's a liberal arts school. So I learned about history, about religion,
00:08:21.380 | English, and also I studied Mandarin and economics.
00:08:24.540 | Why not spend time teaching him these subjects and her? As a graduate of UC Berkeley's Haas School of Business,
00:08:32.420 | I should be able to teach them about cash flow statements,
00:08:35.660 | marketing, and
00:08:37.860 | organizational behavior. And as an operator financial samurai since 2009, I can teach him about writing, marketing,
00:08:45.260 | communications, podcasting,
00:08:48.780 | business development, all these things that can help
00:08:53.180 | generate income and run an online business. And don't forget property management.
00:08:58.180 | Oh, yeah, and property management. Basically, we all are educated, right? You listening to this podcast, reading Financial Samurai,
00:09:04.620 | you all have some sort of education, some sort of skills that
00:09:08.420 | can, you know, you can educate our children. So and for you, you have musical skills,
00:09:14.420 | you can teach our children how to play piano or violin. I mean, what is your thought on
00:09:19.340 | educating our children more to save money in college?
00:09:21.900 | I think the biggest hurdle that most people come across is time. A lot of people are working
00:09:28.500 | Monday through Friday, and they don't have the flexibility or the capacity to homeschool their children.
00:09:35.340 | We're fortunate that we do have
00:09:37.340 | flexibility and the ability to do so if we want.
00:09:40.420 | And
00:09:42.700 | I think for for me a
00:09:45.260 | traditional
00:09:48.660 | school day, maybe three times a week balanced with two days at home would be an
00:09:53.380 | optimal ratio, but you just can't find that really these days.
00:09:57.700 | Okay, so just to counteract your point, we have the weekends to spend time with our children,
00:10:03.780 | we have the mornings, and we have the evenings, right? We all talk about
00:10:09.100 | 40 hour work weeks, right? So that means if you come home at 5 30 p.m. 6 p.m.
00:10:14.220 | You know, you can spend time with your children at night for
00:10:18.500 | 1 to 2 hours and on the weekends you can spend 8 hours.
00:10:21.900 | Obviously, they might not want to listen to you for that long. Right, but then if you're doing that, that's supplemental.
00:10:28.380 | If you're doing homeschooling as primary, if you have a 9 to 5 job and
00:10:33.620 | you want to homeschool your kids at night, what are your kids gonna do during that
00:10:38.460 | period from 9 to 5? Right, so that's what I'm saying, supplemental. Supplemental is a good idea.
00:10:43.060 | Our hybrid seems difficult, but supplemental is just, "Hey, let's just spend more time educating our kids so that by the time they get to
00:10:52.140 | the age of 18, maybe they don't have to go to that expensive college, or maybe they don't have to go to college at all.
00:10:57.440 | Maybe they'll know more about what they want to do and they can take more inexpensive or free courses
00:11:03.500 | to
00:11:05.460 | improve their skills to do that job. Yeah.
00:11:08.020 | You know what? Before we talk about not going to college, we should have talked about saving money by not having kids.
00:11:15.300 | Okay. Now, I know it's a non-starter for many folks who want kids and if too many of us don't have kids,
00:11:22.220 | we can't replace our population and then society will go into decline because who's gonna support, you know,
00:11:28.660 | with Social Security and all that, our older generation, right?
00:11:31.660 | You're seeing a problem with that with China now, given they have their one-child policy and
00:11:36.580 | Japan is going through this demographic decline.
00:11:39.140 | But if you don't have kids, you won't have to save for a college tuition.
00:11:43.540 | You won't have to pay for child care.
00:11:46.420 | You don't have to buy college textbooks, get as big of a house,
00:11:50.100 | get as large of a car, buy as much food, buy as many plane tickets, and pay as much in health care expenses.
00:11:56.820 | Right? Like our health care expenses every month, it's unsubsidized. It's like $2,300 a month.
00:12:01.820 | If we didn't have two kids, it'd probably be like only $1,800 a month.
00:12:06.780 | We wouldn't have had to have bought a bigger house in 2020,
00:12:11.340 | which would have saved us a lot of money here in San Francisco.
00:12:15.620 | And we wouldn't have to pay for grade school tuition, language immersion. So our cash flow would be way up.
00:12:22.740 | Yeah. And so in my mind,
00:12:24.860 | not having kids is one of the best solutions to combating inflation.
00:12:30.540 | What are your thoughts on this solution?
00:12:32.540 | If you want kids, but haven't had them yet,
00:12:35.500 | then you can use this time to really think about your finances and putting together a plan or a
00:12:42.700 | savings target that you want to achieve or certain milestones in your career that you want to hit before starting a family.
00:12:50.700 | But you know, there's other things that you have to weigh as well in terms of your biology and your age.
00:12:55.420 | It's a difficult situation with kids. Yeah.
00:12:58.860 | I have an article that I wrote in terms of answering what is the best age to have a baby?
00:13:04.940 | And the conclusion was between, well, I think the conclusion was age 32.
00:13:09.980 | And that's to consider biology in terms of safety and the feasibility of having children as well as
00:13:17.180 | 10 years post-college or
00:13:19.220 | 14 years post high school to make enough and save enough money to feel financially secure to have children.
00:13:26.060 | And I do agree that having a net worth target or savings target to shoot for before having children
00:13:32.380 | will help you feel better once you do have children. Some people say children are not expensive.
00:13:38.460 | We say they can be as expensive as you want them to be.
00:13:43.340 | A financial samurai reader named Eva Marie said, "I love this idea. Yes, you can combat inflation in a very straightforward way.
00:13:50.900 | However, I disagree with the whole quote kids are so expensive nonsense.
00:13:55.820 | Though every time I see one of those calculators, I just have to laugh because they're so niche."
00:14:01.980 | That's like saying modern life is just so expensive with my brand new iPhone, two new SUVs,
00:14:09.180 | designer clothing, expensive vacations, and myriad subscriptions to services that only
00:14:14.620 | marginally improve my life, if at all.
00:14:17.980 | Yes, all kids need care, food, shelter, clothing, and transportation.
00:14:22.780 | But as a full-time caregiver, I don't pay anybody to do it. I can make food for a lot cheaper than buying it, and
00:14:29.660 | yes, it's delicious. I can fit three kids in a bedroom, easy peasy, even teenagers, and I know because I do it.
00:14:37.780 | As far as clothing goes, buy high quality for discount prices and then hand them down.
00:14:42.700 | Teach your kids skills instead of paying someone else. I have the internet and a brain. I can do this.
00:14:50.220 | Spend time together as a family instead of shuffling everybody to ridiculously expensive
00:14:55.220 | extracurricular activities, and life is great and cheap. And the first reaction
00:15:01.060 | I thought to that was, "That's a great attitude to teach your kids skills instead of paying someone else."
00:15:05.180 | Because that's what we just talked about, teaching our children everything.
00:15:08.540 | But also I had to laugh when she talked about three kids in one room because we just came back from Sonoma,
00:15:14.580 | and we attempted to have our two kids, three and five and three quarters year old,
00:15:20.260 | sleep together for the first time in the same room.
00:15:22.660 | Well, what happened?
00:15:25.180 | Well, our daughter woke up.
00:15:27.180 | Gosh, the first night was was pretty bad, and she just kept waking up and she was screaming,
00:15:34.100 | and then she was just saying no like every five seconds, and our son was like,
00:15:38.700 | "Stop saying no!" from across the room, and I was just so stressed out because nobody was sleeping at that point.
00:15:45.780 | I mean, every family is different. Every child is different, and for us,
00:15:51.620 | at this age, it just was not working. So maybe in a couple years they can bunk together.
00:15:58.220 | Yeah. When he's almost eight and she's five.
00:16:00.940 | All right, we talked about
00:16:04.140 | college. We talked about kids. Now, let's talk about eating less, not wasting food, and staying in better shape
00:16:11.420 | to save money and combat inflation. I'm not sure why these recommendations to counteract inflation may be controversial.
00:16:19.380 | Surely eating less will save you money.
00:16:22.820 | Staying in better shape will increase your chances of living a more comfortable and longer life.
00:16:28.460 | You know, these are pretty logical to me. I remember in 2020,
00:16:32.340 | there's like news report after news report showing some relatively unhealthy looking folks who are passing away from COVID-19,
00:16:40.820 | and there was an underlying theme there, and they all had comorbidities.
00:16:45.860 | So comorbidities because of some other health issues, and
00:16:50.340 | the data says that those with more comorbidities
00:16:55.060 | had a higher death rate. And so,
00:16:59.380 | logically, I think most of us who fear dying would spend
00:17:03.100 | more time exercising and eating healthier foods.
00:17:06.700 | So what are your thoughts about eating healthier and exercising more to save money?
00:17:12.460 | I think it's a great idea. In reality, it can be very hard.
00:17:16.580 | I know for me, I love to snack,
00:17:19.980 | and I don't need to snack, but I often do. But the interesting thing was I
00:17:26.260 | got braces, Invisalign, for about nine months,
00:17:29.580 | about a year and a half ago, and
00:17:32.460 | people were telling me, "Oh, you're gonna snack less. It's a great way to lose weight." And I didn't really
00:17:37.900 | get it until I started wearing the trays. And you have to take your trays out every time you eat or eat a
00:17:46.060 | drink, a hot beverage, for example, and it becomes a royal pain in the butt to
00:17:52.780 | take those trays in and out and clean them and brush your teeth and floss every time. And I
00:17:58.020 | actually did end up losing weight because I cut out all my snacking. I had a reason to lose weight, and I did. It was great.
00:18:05.740 | So the reason to do something, I think, is a very powerful motivator. So we have to all ask ourselves,
00:18:12.460 | "Why do we get up in the morning to go to a job to make money?" If it's not the perfect job or a great job,
00:18:19.220 | why do we do it? So we have to spend time listing out our reasons. The reason why,
00:18:24.580 | one of the reasons why we record this podcast is to help y'all
00:18:28.580 | get better in touch with us and to learn more about personal finances. The other reason, which is actually
00:18:34.300 | honestly the most powerful reason why we continue to record these podcasts, is because we want to create an archive of
00:18:41.620 | audio episodes for our children to listen to when they're older.
00:18:45.660 | And it's also a hedge just in case one or both of us pass away prematurely. I think it would be just a wonderful gift
00:18:51.940 | to our kids. So this is an intrinsic
00:18:55.460 | motivator to keep going even though there aren't any financial sponsors, no monetary reward.
00:19:01.460 | Find your intrinsic motivation to do something. They can be for your children or for your parents or
00:19:08.300 | for a friend or a loved one or just for yourself.
00:19:11.820 | I've
00:19:13.500 | struggled with weight my entire life as well.
00:19:16.540 | I was a relatively chubby kid and then I grew out of it. I worked out a lot.
00:19:21.140 | You know, I wanted to make friends, find a girlfriend, look good, feel good.
00:19:26.060 | And now that I play, I've been playing a lot of tennis for over 25 years,
00:19:30.460 | any type of weight gain really slows me down and it weighs on my knees.
00:19:34.940 | And so I've tried to maintain the same weight since college. So one, I could fit into the same clothes
00:19:41.380 | so I don't have to buy more clothes. But two, I've been wanting to keep the weight off so I can
00:19:46.200 | potentially win more tennis matches and now pickleball matches. So it means to an end and also the end itself.
00:19:53.100 | Now with inflation so high, I have another reason to
00:19:57.300 | maintain my weight and that is to save money on food costs.
00:20:01.340 | Again, food hasn't inflated as much as a lot of other things. Food and beverages are up about
00:20:09.540 | 75% since 2000 versus
00:20:11.580 | 230% for hospital services, but they're all tied together. What we eat, our health and all that. So
00:20:19.900 | let's pay attention more to what we eat and how much we exercise. Oh,
00:20:24.620 | there is one more thing we should all be aware of and that is to not waste food.
00:20:31.020 | According to feedingamerica.org, each year 119 billion pounds of food is wasted in the United States.
00:20:37.820 | That equates to 130 billion meals and more than 408 billion in food thrown away each year.
00:20:43.940 | So 40% of all food in America is wasted and the food waste in our homes make up about
00:20:50.100 | 39% of all food waste or about 42 billion pounds of food wasted.
00:20:56.900 | Think about how many times we go to the grocery store,
00:21:00.020 | buy food, and then we peek in our refrigerator a week later and realize, "Oh, we didn't end up eating what we bought."
00:21:07.340 | I've done that before. I'm sure many of you have as well.
00:21:11.100 | So if we stop wasting as much food, we eat everything on our plate and
00:21:16.060 | everything in our refrigerators and freezers, we could easily
00:21:20.380 | counteract up to, let's say, 16% food inflation every single year if we don't waste our food.
00:21:28.300 | I remember growing up eating with my parents and boy, I got a tongue lashing and
00:21:35.220 | sometimes I remember if I didn't eat every single kernel of rice from my bowl, my mom would make me
00:21:40.860 | stick out my hands and slap them and then she would just explain, "Look, there are
00:21:46.860 | billions of people who are malnourished or who are hungry every single day.
00:21:52.060 | You are disrespecting them and you're being an entitled brat if you don't finish all your food.
00:21:58.740 | And you're also insulting the cook. The people, me,
00:22:03.740 | she was talking about, who spend time making the food for you. So be respectful.
00:22:08.420 | Be thankful." I'd love to hear from all of you whether
00:22:13.460 | inflation is negatively impacting your lifestyles. How are you changing your behaviors?
00:22:19.700 | We all know food, gas, and utility prices are higher.
00:22:24.180 | They are recurring expenses. So I wonder,
00:22:28.140 | is it because they are reoccurring that we're just annoyed by these higher prices or do they really
00:22:34.500 | account for a large percentage of our budget? Food, gas, and utilities.
00:22:40.540 | Everybody's different. I'd love to hear from you. I suspect that because these are reoccurring
00:22:46.180 | expenses, we kind of just get reminded and agitated. "Ah, we got to pay more money."
00:22:51.780 | I remember this one place, they have this Greg
00:22:54.260 | black bean noodles and egg omelet and it was priced at $15, like $14.99 on Uber Eats.
00:23:00.980 | And then one day they jacked it up to $20.
00:23:04.700 | And I stopped ordering that entirely because I thought that was ridiculous. That's a, you know, a large increase, 35% increase.
00:23:11.420 | And I found that to be somewhat annoying because I really was craving those black bean noodles and egg omelet that they make.
00:23:18.740 | But in terms of the overall cost to our income,
00:23:22.820 | it's not huge. Obviously, the lower your income, the higher percentage of these overall costs.
00:23:28.620 | But I'm trying to figure out, is it the annoyance or the actual cost that's really,
00:23:33.740 | really agitating a lot of American households? What are your thoughts?
00:23:37.340 | It's hard. I would think
00:23:40.220 | the agitation
00:23:42.900 | definitely is, is just
00:23:45.820 | aggravating because it just happens all the time. Like every time you go to the gas pump or every time you're buying groceries.
00:23:51.940 | And I do most of the grocery shopping for us. And so it's just, gosh, I was like, wow,
00:23:57.500 | I really cost this much to get, you know,
00:23:59.860 | just this and I'm paying that much, you know.
00:24:03.300 | I definitely find myself thinking that a lot.
00:24:06.460 | So what I've tried to do is instead of buying groceries once a week, I am
00:24:12.700 | now doing it two times a week, sometimes three, just in smaller
00:24:18.300 | quantities so that the food stays fresher longer and we have less waste. That's one strategy that I've been trying.
00:24:23.540 | Okay. Well, my strategy on the black bean noodles and egg omelet is just not buy it and be hungry.
00:24:31.980 | Or just eat whatever else is left in my fridge, even if it's like, you know, six-day-old rubber chicken.
00:24:38.180 | And so my point is,
00:24:40.620 | we have the ability to not spend as much money. There's a lot of discretionary items.
00:24:48.060 | Right? We don't have to send our kids to private school. We don't have to take an Uber home.
00:24:53.780 | We can take a bus or we can bike or we can walk.
00:24:56.060 | You don't have to buy a $78 dry-aged ribeye. You can buy
00:25:01.300 | $10 cheeseburger. It sounds expensive still, but $10 cheeseburger that tastes just as good.
00:25:06.580 | So if we have the ability to be discretionary in our consumption, that's a great way to combat inflation.
00:25:15.460 | The one thing we can't really combat in terms of inflation, well, there's two things.
00:25:19.540 | One, health care expenses. We spend the most per capita, yet our life expectancy is not the highest in the world.
00:25:27.020 | It's not close. And so that is a problem and we can't really do anything about it except, you know, earn
00:25:33.100 | below 400% of the federal poverty level limit to get some subsidies or
00:25:37.940 | work at a job that provides health care subsidies. And this is one of the biggest expenses for us.
00:25:45.020 | We're only $2,300 a month because we don't have employers subsidizing our health insurance.
00:25:49.420 | So really think about that, especially if you're having children.
00:25:52.980 | Since we can't do much about our health care expenses besides, you know, doing those several things,
00:25:58.900 | we should try to eat as best as we can and stay healthy, right? We talked about this.
00:26:03.300 | The other thing we can do is we can get neutral real estate by owning our primary residence and getting a fixed-rate mortgage.
00:26:10.380 | This is for most Americans. 66% of Americans own their primary residence.
00:26:16.460 | So you can get a fixed-rate mortgage and several years you'll realize or you'll start feeling, "Ah,
00:26:20.940 | living is not that expensive."
00:26:23.540 | Because if you're a renter, you're at the mercy of inflation and you're a price taker.
00:26:28.180 | Now, here's the segment where I want to address where one reader named Peter said, "I'm tone-deaf."
00:26:34.260 | He said, "Suggesting people to give up going to the best schools,
00:26:38.420 | have fewer or no children, eat cheaper and less nutritious food,
00:26:43.060 | just strikes me as being tone-deaf and a poor solution that sounds like it mostly benefits the well-off in this country."
00:26:50.260 | He goes on to say, "The real problem with inflation and currency debasement
00:26:54.820 | is that it prevents people from saving and forces people to monetize assets that are generally risky and/or overvalued,
00:27:01.300 | e.g. stock markets, housing.
00:27:04.260 | Housing is a particularly good example as most people use their house as their savings account.
00:27:09.140 | At the current 30-year mortgage rate, a family would need 20% down and a
00:27:13.860 | $120,000 gross income to afford the average American home." So who exactly is buying the average
00:27:21.220 | American home? And for that comment, I appreciate being called tone-deaf and also out of touch because I tried to be
00:27:29.340 | realistic in my assessment and assumptions. It's one of the reasons why I entitled the podcast episode in the post,
00:27:34.620 | "Combating Inflation is Straightforward, but Not Easy." It's not easy because life is difficult.
00:27:41.940 | We all have different choices. We start in different places.
00:27:45.620 | However, I do want us all to recognize our own
00:27:49.700 | realities, our own realities. If we are struggling with inflation, if we want to save money,
00:27:56.420 | then maybe we can't send our kids to the best private schools.
00:28:00.860 | Maybe we can't have many children.
00:28:04.380 | Maybe it is better to substitute
00:28:07.740 | lower cost foods that might be less nutritious,
00:28:10.780 | but at least it'll save us money, if we feel that inflation is combating us.
00:28:15.020 | I know my wife and I, we delayed having children until our late 30s because we couldn't
00:28:21.020 | afford, we didn't feel like we could comfortably afford to have a child in expensive San Francisco.
00:28:26.460 | Therefore, we waited. I don't think it's tone-deaf that we waited to be able to comfortably afford having children to have children.
00:28:34.740 | I actually think that's quite responsible and reasonable.
00:28:38.060 | I feel bad if someone else, you know, taxpayers are gonna subsidize
00:28:43.380 | our childcare expenses because it was our choice to have children, our choice to bring them into the world.
00:28:50.180 | For college, when I was in high school,
00:28:52.180 | I recognized my parents weren't rich because we lived in a townhouse and we drove a
00:28:57.580 | nine-year-old Toyota Camry.
00:29:00.100 | So I researched the cost of going to private school and the cost of going to public college and I decided, you know what,
00:29:07.100 | I got into Babson College, which costs $25,000 a year in private school tuition,
00:29:11.460 | and I got into the College of William & Mary that cost $2,800 in in-state tuition.
00:29:16.940 | I'm gonna go to the William & Mary because worst case, if I graduate without a job,
00:29:21.780 | I can go back to my minimum wage job at McDonald's making $4 an hour and pay back my parents.
00:29:28.300 | I think that is responsible and rational thinking.
00:29:31.580 | I don't think that's tone-deaf and I don't think that's entitled at all.
00:29:34.900 | And finally, to address the commoners question, who is buying these houses today in America?
00:29:40.420 | Well,
00:29:42.060 | 66% of Americans own homes and
00:29:46.340 | 40% of those homes are owned free and clear without a mortgage.
00:29:49.460 | So who is buying? Well, the majority of Americans are buying.
00:29:53.460 | There's a fallacy where you compare the median home price to the median household income.
00:29:58.700 | It's actually not the median household income buying. It's never been that way.
00:30:02.420 | It's the person with enough funds who are buying and it's clear from the statistics that the majority of Americans are buying.
00:30:09.660 | So I'd like to ask you, Sydney, do you think I'm tone-deaf for discussing
00:30:15.580 | inflation and talking about how to combat inflation?
00:30:19.100 | Not at all. Not at all.
00:30:20.460 | So why do you think some people do think I'm tone-deaf or think my reality is not as real as their reality?
00:30:27.620 | Because people forget that reality is unique to each individual.
00:30:32.620 | Hmm. That's a great answer.
00:30:35.140 | Why is it so hard to understand another person's point of view?
00:30:39.740 | I think we all get kind of lost in our own world sometimes and
00:30:43.980 | everybody has problems and we kind of get so sucked up into all the things that are stressing us out or
00:30:51.820 | causing us misery, suffering, and pain and we forget that there's
00:30:56.500 | lots and lots of other people in the world who have their own issues going on.
00:31:00.620 | Yeah, that's true. It's impossible to understand what everybody else is going through because we're not walking in other people's shoes.
00:31:08.500 | Everybody's shoes. All we can do is really listen, empathize, and try to think again
00:31:13.860 | about how our original beliefs differ from someone else's beliefs.
00:31:18.380 | So this is one of the most fun thing about Financial Samurai is that I can put out something,
00:31:24.500 | share my opinions, and then get feedback from as many people who want to share as possible,
00:31:30.540 | hopefully in a respectful way, so that I can shine lights on my blind spots and have these aha moments.
00:31:36.060 | That's actually really exciting to me. So please, if you disagree with me, please let me know.
00:31:41.300 | Obviously in a respectful manner, but please let me know. I'm not gonna attack your opinions.
00:31:45.420 | I'm gonna ask more about your background and why you think the way you do so we can come to better decision-making.
00:31:51.700 | This is part of the thesis in my book, "By This, Not That." Coming to better
00:31:56.260 | optimal decisions with a 70% probability and confidence that we'll get it right and
00:32:01.580 | while having the humility knowing that, you know, 20-30% of the time, hopefully not much more than 30% of the time,
00:32:07.100 | we're gonna get it wrong, but when we do, we learn from our mistakes.
00:32:10.780 | So we can make better decisions going forward.
00:32:13.940 | Alright, everyone. Thanks for listening to this latest episode.
00:32:16.740 | If you enjoyed it, please leave a positive 5-star review with some commentary to share your thoughts.
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00:32:26.500 | I'm sure they will enjoy it too.
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00:32:40.020 | Thanks so much.
00:32:41.020 | Take care, everybody.
00:32:42.020 | Bye-bye, everybody.