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 on how to do so. Also, thanks to everyone who left a really positive five-star review with commentary for this podcast. Really appreciate it. I had mentioned in my newsletter at FinancialSamurai.com/news that I would be taking a break from podcasting until the reviews got to over 400 because I'm trying to do load management.

If you've ever watched NFL or NBA games, 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 bodies to heal and to be ready for the playoffs. So thank you very much. These reviews keep us going and keep us motivated.

We don't have any sponsors. We just like to share our thoughts and also like to share some of your thoughts as well. So without further ado, we want to talk about inflation because inflation is the topic du jour that the government is really trying to squash. The Fed is so determined to squash inflation that it's likely to keep on raising the Fed funds rate, maybe until 5.25 to 5.5% mid-2023.

There was hope that they'd stop by 5%, that they'd start cutting by the end of 2023, but I think that hope is all lost because of the strong inflationary data in January. So I thought, well, why not write a post about how to combat inflation and also share with you some reader commentary on how they're combating inflation and also talk about this issue about us being tone-deaf about how straightforward it is to combat inflation, but highlighting that it's not easy and it's different for all of us.

To start off, the latest inflationary numbers for January 2023 came in at 6.4%. Now that's down from mid-2022, peak level of 8.9%. And I wanted to highlight the inflationary changes, the price changes of consumer goods and services since 2000. And the goods and services that inflated the most are hospital services up something like 230%, college tuition and fees up about 170%, college textbooks up about 155%, medical care services up about 140%, child care up about 120%, food and beverage up about 75%, housing up about 70%, new cars up about 20%, household furnishing up about 17%, and clothing about flat.

Now since the year 2000, here are the items that declined in prices. Cell phone services, software, toys, and televisions. So if we want to combat inflation, it's pretty straightforward, right? We can decide not to go to college or attend community college or a state school like my wife and I did.

We can stay in great physical and mental shape to decrease our chances of receiving medical services. We can eat less and/or substitute cheaper foods. This is a very contentious topic. I think people are offended by this in particular for the idea of eating less for some reason, but that is obviously a straightforward way to not feel as much brunt on food inflation.

We can decide not to buy new cars because the average new car price is almost $50,000 now, which is crazy compared to the median household income of about $75,000 today. We can also drive our existing cars for as long as possible, or we can take public transportation more. We can decide not to have kids or have fewer kids.

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 faster than the rate of inflation. Of course, not all of you will completely agree with all the above listed items to combat inflation. I suspect some of you may balk at not going to college or going to state school like we did, eating less and not having kids the most.

Further, if you have kids already, it's not like you can just return them. Hence, let's discuss in a little more detail about the items and strategies to help save money. We all have different opinions. 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, it's straightforward to combat inflation, but it's not easy because of human nature.

The more we desire to save money, I think the more we will agree that the above strategies will help. And the less we desire to save money, I think the less we will agree. Let's start off with college. Personally, I believe college is crazy expensive now, given everything can be learned online for free.

So why is it that college tuition is inflating faster than headline inflation? It makes no sense to me. There are more administrators than college professors. What is going on, folks? Part of the reason why I'm recording Financial Samurai podcast and writing on Financial Samurai and doing the newsletters is to provide as much free education based on firsthand experience as possible.

I strongly believe if you listen to this podcast regularly and read the newsletters and read the posts, you're gonna be more financially educated than 99% of the population. Yet, tuition costs still keep on climbing so much and it just seems like there's a problem. What are your thoughts on going to college, not going to college to save money, or going to state school or community college, Sydney?

Times are changing and costs are just out of control. So I think it makes sense for people to look at more options today, such as trade school or junior college or just skipping college altogether and utilizing online resources. We've had discussions ourselves about whether or not we want our kids to continue on the traditional path or if we want to switch them back to homeschool at some point.

What do you think? I think homeschool is pretty elucidating. There's something interesting that happened the other day. I asked our son as I do every single time I pick him up and drive 20 minutes back home. What did you learn today in school? I forced him to tell me one thing to justify the cost of his tuition and he said, you know, I read Brown Bear, Brown Bear.

And then he talked about, you know, we learned about octagons. And I told him, didn't we learn this like two years ago when we were homeschooling you? And he goes, yeah, we did. I was like, ah, interesting. So the efficiency of homeschooling is much higher than regular schooling. I really believe you can teach two to three times more homeschooling.

You know, when I was growing up, I would always wonder how do these kids graduate high school at 14 years old? How do they graduate college at 18 years old? It's because a lot of them were homeschooled and they had supplemental education from their parents or tutors and then they just skipped grades.

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. Why don't we just teach our children everything we know and if they know everything we know, then they should be able to do our jobs, which means that they should be able to earn money.

And if we can't teach them everything we know, then what did we really learn in college? And maybe we need to spend more time with them. Instead of just spending five hundred thousand and fifteen years to send them to college, which sounds crazy, why don't we just spend more time teaching them?

For example, I graduated from the College of William & Mary. It's a liberal arts school. So I learned about history, about religion, English, and also I studied Mandarin and economics. Why not spend time teaching him these subjects and her? As a graduate of UC Berkeley's Haas School of Business, I should be able to teach them about cash flow statements, marketing, and organizational behavior.

And as an operator financial samurai since 2009, I can teach him about writing, marketing, communications, podcasting, business development, all these things that can help generate income and run an online business. And don't forget property management. Oh, yeah, and property management. Basically, we all are educated, right? You listening to this podcast, reading Financial Samurai, you all have some sort of education, some sort of skills that can, you know, you can educate our children.

So and for you, you have musical skills, you can teach our children how to play piano or violin. I mean, what is your thought on educating our children more to save money in college? I think the biggest hurdle that most people come across is time. A lot of people are working Monday through Friday, and they don't have the flexibility or the capacity to homeschool their children.

We're fortunate that we do have flexibility and the ability to do so if we want. And I think for for me a traditional school day, maybe three times a week balanced with two days at home would be an optimal ratio, but you just can't find that really these days.

Okay, so just to counteract your point, we have the weekends to spend time with our children, we have the mornings, and we have the evenings, right? We all talk about 40 hour work weeks, right? So that means if you come home at 5 30 p.m. 6 p.m. You know, you can spend time with your children at night for 1 to 2 hours and on the weekends you can spend 8 hours.

Obviously, they might not want to listen to you for that long. Right, but then if you're doing that, that's supplemental. If you're doing homeschooling as primary, if you have a 9 to 5 job and you want to homeschool your kids at night, what are your kids gonna do during that period from 9 to 5?

Right, so that's what I'm saying, supplemental. Supplemental is a good idea. 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 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.

Maybe they'll know more about what they want to do and they can take more inexpensive or free courses to improve their skills to do that job. Yeah. You know what? Before we talk about not going to college, we should have talked about saving money by not having kids. 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, we can't replace our population and then society will go into decline because who's gonna support, you know, with Social Security and all that, our older generation, right? You're seeing a problem with that with China now, given they have their one-child policy and Japan is going through this demographic decline.

But if you don't have kids, you won't have to save for a college tuition. You won't have to pay for child care. You don't have to buy college textbooks, get as big of a house, get as large of a car, buy as much food, buy as many plane tickets, and pay as much in health care expenses.

Right? Like our health care expenses every month, it's unsubsidized. It's like $2,300 a month. If we didn't have two kids, it'd probably be like only $1,800 a month. We wouldn't have had to have bought a bigger house in 2020, which would have saved us a lot of money here in San Francisco.

And we wouldn't have to pay for grade school tuition, language immersion. So our cash flow would be way up. Yeah. And so in my mind, not having kids is one of the best solutions to combating inflation. What are your thoughts on this solution? If you want kids, but haven't had them yet, then you can use this time to really think about your finances and putting together a plan or a savings target that you want to achieve or certain milestones in your career that you want to hit before starting a family.

But you know, there's other things that you have to weigh as well in terms of your biology and your age. It's a difficult situation with kids. Yeah. I have an article that I wrote in terms of answering what is the best age to have a baby? And the conclusion was between, well, I think the conclusion was age 32.

And that's to consider biology in terms of safety and the feasibility of having children as well as 10 years post-college or 14 years post high school to make enough and save enough money to feel financially secure to have children. And I do agree that having a net worth target or savings target to shoot for before having children will help you feel better once you do have children.

Some people say children are not expensive. We say they can be as expensive as you want them to be. A financial samurai reader named Eva Marie said, "I love this idea. Yes, you can combat inflation in a very straightforward way. However, I disagree with the whole quote kids are so expensive nonsense.

Though every time I see one of those calculators, I just have to laugh because they're so niche." That's like saying modern life is just so expensive with my brand new iPhone, two new SUVs, designer clothing, expensive vacations, and myriad subscriptions to services that only marginally improve my life, if at all.

Yes, all kids need care, food, shelter, clothing, and transportation. 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 yes, it's delicious. I can fit three kids in a bedroom, easy peasy, even teenagers, and I know because I do it.

As far as clothing goes, buy high quality for discount prices and then hand them down. Teach your kids skills instead of paying someone else. I have the internet and a brain. I can do this. Spend time together as a family instead of shuffling everybody to ridiculously expensive extracurricular activities, and life is great and cheap.

And the first reaction I thought to that was, "That's a great attitude to teach your kids skills instead of paying someone else." Because that's what we just talked about, teaching our children everything. But also I had to laugh when she talked about three kids in one room because we just came back from Sonoma, and we attempted to have our two kids, three and five and three quarters year old, sleep together for the first time in the same room.

Well, what happened? Well, our daughter woke up. Gosh, the first night was was pretty bad, and she just kept waking up and she was screaming, and then she was just saying no like every five seconds, and our son was like, "Stop saying no!" from across the room, and I was just so stressed out because nobody was sleeping at that point.

I mean, every family is different. Every child is different, and for us, at this age, it just was not working. So maybe in a couple years they can bunk together. Yeah. When he's almost eight and she's five. All right, we talked about college. We talked about kids. Now, let's talk about eating less, not wasting food, and staying in better shape to save money and combat inflation.

I'm not sure why these recommendations to counteract inflation may be controversial. Surely eating less will save you money. Staying in better shape will increase your chances of living a more comfortable and longer life. You know, these are pretty logical to me. I remember in 2020, there's like news report after news report showing some relatively unhealthy looking folks who are passing away from COVID-19, and there was an underlying theme there, and they all had comorbidities.

So comorbidities because of some other health issues, and the data says that those with more comorbidities had a higher death rate. And so, logically, I think most of us who fear dying would spend more time exercising and eating healthier foods. So what are your thoughts about eating healthier and exercising more to save money?

I think it's a great idea. In reality, it can be very hard. I know for me, I love to snack, and I don't need to snack, but I often do. But the interesting thing was I got braces, Invisalign, for about nine months, about a year and a half ago, and people were telling me, "Oh, you're gonna snack less.

It's a great way to lose weight." And I didn't really get it until I started wearing the trays. And you have to take your trays out every time you eat or eat a drink, a hot beverage, for example, and it becomes a royal pain in the butt to take those trays in and out and clean them and brush your teeth and floss every time.

And I 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. So the reason to do something, I think, is a very powerful motivator. So we have to all ask ourselves, "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, why do we do it?

So we have to spend time listing out our reasons. The reason why, one of the reasons why we record this podcast is to help y'all get better in touch with us and to learn more about personal finances. The other reason, which is actually honestly the most powerful reason why we continue to record these podcasts, is because we want to create an archive of audio episodes for our children to listen to when they're older.

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 to our kids. So this is an intrinsic motivator to keep going even though there aren't any financial sponsors, no monetary reward. Find your intrinsic motivation to do something.

They can be for your children or for your parents or for a friend or a loved one or just for yourself. I've struggled with weight my entire life as well. I was a relatively chubby kid and then I grew out of it. I worked out a lot. You know, I wanted to make friends, find a girlfriend, look good, feel good.

And now that I play, I've been playing a lot of tennis for over 25 years, any type of weight gain really slows me down and it weighs on my knees. And so I've tried to maintain the same weight since college. So one, I could fit into the same clothes so I don't have to buy more clothes.

But two, I've been wanting to keep the weight off so I can potentially win more tennis matches and now pickleball matches. So it means to an end and also the end itself. Now with inflation so high, I have another reason to maintain my weight and that is to save money on food costs.

Again, food hasn't inflated as much as a lot of other things. Food and beverages are up about 75% since 2000 versus 230% for hospital services, but they're all tied together. What we eat, our health and all that. So let's pay attention more to what we eat and how much we exercise.

Oh, there is one more thing we should all be aware of and that is to not waste food. According to feedingamerica.org, each year 119 billion pounds of food is wasted in the United States. That equates to 130 billion meals and more than 408 billion in food thrown away each year.

So 40% of all food in America is wasted and the food waste in our homes make up about 39% of all food waste or about 42 billion pounds of food wasted. Think about how many times we go to the grocery store, buy food, and then we peek in our refrigerator a week later and realize, "Oh, we didn't end up eating what we bought." I've done that before.

I'm sure many of you have as well. So if we stop wasting as much food, we eat everything on our plate and everything in our refrigerators and freezers, we could easily counteract up to, let's say, 16% food inflation every single year if we don't waste our food. I remember growing up eating with my parents and boy, I got a tongue lashing and sometimes I remember if I didn't eat every single kernel of rice from my bowl, my mom would make me stick out my hands and slap them and then she would just explain, "Look, there are billions of people who are malnourished or who are hungry every single day.

You are disrespecting them and you're being an entitled brat if you don't finish all your food. And you're also insulting the cook. The people, me, she was talking about, who spend time making the food for you. So be respectful. Be thankful." I'd love to hear from all of you whether inflation is negatively impacting your lifestyles.

How are you changing your behaviors? We all know food, gas, and utility prices are higher. They are recurring expenses. So I wonder, is it because they are reoccurring that we're just annoyed by these higher prices or do they really account for a large percentage of our budget? Food, gas, and utilities.

Everybody's different. I'd love to hear from you. I suspect that because these are reoccurring expenses, we kind of just get reminded and agitated. "Ah, we got to pay more money." I remember this one place, they have this Greg black bean noodles and egg omelet and it was priced at $15, like $14.99 on Uber Eats.

And then one day they jacked it up to $20. And I stopped ordering that entirely because I thought that was ridiculous. That's a, you know, a large increase, 35% increase. And I found that to be somewhat annoying because I really was craving those black bean noodles and egg omelet that they make.

But in terms of the overall cost to our income, it's not huge. Obviously, the lower your income, the higher percentage of these overall costs. But I'm trying to figure out, is it the annoyance or the actual cost that's really, really agitating a lot of American households? What are your thoughts?

It's hard. I would think the agitation definitely is, is just aggravating because it just happens all the time. Like every time you go to the gas pump or every time you're buying groceries. And I do most of the grocery shopping for us. And so it's just, gosh, I was like, wow, I really cost this much to get, you know, just this and I'm paying that much, you know.

I definitely find myself thinking that a lot. So what I've tried to do is instead of buying groceries once a week, I am now doing it two times a week, sometimes three, just in smaller quantities so that the food stays fresher longer and we have less waste. That's one strategy that I've been trying.

Okay. Well, my strategy on the black bean noodles and egg omelet is just not buy it and be hungry. Or just eat whatever else is left in my fridge, even if it's like, you know, six-day-old rubber chicken. And so my point is, we have the ability to not spend as much money.

There's a lot of discretionary items. Right? We don't have to send our kids to private school. We don't have to take an Uber home. We can take a bus or we can bike or we can walk. You don't have to buy a $78 dry-aged ribeye. You can buy $10 cheeseburger.

It sounds expensive still, but $10 cheeseburger that tastes just as good. So if we have the ability to be discretionary in our consumption, that's a great way to combat inflation. The one thing we can't really combat in terms of inflation, well, there's two things. One, health care expenses. We spend the most per capita, yet our life expectancy is not the highest in the world.

It's not close. And so that is a problem and we can't really do anything about it except, you know, earn below 400% of the federal poverty level limit to get some subsidies or work at a job that provides health care subsidies. And this is one of the biggest expenses for us.

We're only $2,300 a month because we don't have employers subsidizing our health insurance. So really think about that, especially if you're having children. Since we can't do much about our health care expenses besides, you know, doing those several things, we should try to eat as best as we can and stay healthy, right?

We talked about this. The other thing we can do is we can get neutral real estate by owning our primary residence and getting a fixed-rate mortgage. This is for most Americans. 66% of Americans own their primary residence. So you can get a fixed-rate mortgage and several years you'll realize or you'll start feeling, "Ah, living is not that expensive." Because if you're a renter, you're at the mercy of inflation and you're a price taker.

Now, here's the segment where I want to address where one reader named Peter said, "I'm tone-deaf." He said, "Suggesting people to give up going to the best schools, have fewer or no children, eat cheaper and less nutritious food, just strikes me as being tone-deaf and a poor solution that sounds like it mostly benefits the well-off in this country." He goes on to say, "The real problem with inflation and currency debasement is that it prevents people from saving and forces people to monetize assets that are generally risky and/or overvalued, e.g.

stock markets, housing. Housing is a particularly good example as most people use their house as their savings account. At the current 30-year mortgage rate, a family would need 20% down and a $120,000 gross income to afford the average American home." So who exactly is buying the average American home?

And for that comment, I appreciate being called tone-deaf and also out of touch because I tried to be realistic in my assessment and assumptions. It's one of the reasons why I entitled the podcast episode in the post, "Combating Inflation is Straightforward, but Not Easy." It's not easy because life is difficult.

We all have different choices. We start in different places. However, I do want us all to recognize our own realities, our own realities. If we are struggling with inflation, if we want to save money, then maybe we can't send our kids to the best private schools. Maybe we can't have many children.

Maybe it is better to substitute lower cost foods that might be less nutritious, but at least it'll save us money, if we feel that inflation is combating us. I know my wife and I, we delayed having children until our late 30s because we couldn't afford, we didn't feel like we could comfortably afford to have a child in expensive San Francisco.

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. I actually think that's quite responsible and reasonable. I feel bad if someone else, you know, taxpayers are gonna subsidize our childcare expenses because it was our choice to have children, our choice to bring them into the world.

For college, when I was in high school, I recognized my parents weren't rich because we lived in a townhouse and we drove a nine-year-old Toyota Camry. So I researched the cost of going to private school and the cost of going to public college and I decided, you know what, I got into Babson College, which costs $25,000 a year in private school tuition, and I got into the College of William & Mary that cost $2,800 in in-state tuition.

I'm gonna go to the William & Mary because worst case, if I graduate without a job, I can go back to my minimum wage job at McDonald's making $4 an hour and pay back my parents. I think that is responsible and rational thinking. I don't think that's tone-deaf and I don't think that's entitled at all.

And finally, to address the commoners question, who is buying these houses today in America? Well, 66% of Americans own homes and 40% of those homes are owned free and clear without a mortgage. So who is buying? Well, the majority of Americans are buying. There's a fallacy where you compare the median home price to the median household income.

It's actually not the median household income buying. It's never been that way. It's the person with enough funds who are buying and it's clear from the statistics that the majority of Americans are buying. So I'd like to ask you, Sydney, do you think I'm tone-deaf for discussing inflation and talking about how to combat inflation?

Not at all. Not at all. So why do you think some people do think I'm tone-deaf or think my reality is not as real as their reality? Because people forget that reality is unique to each individual. Hmm. That's a great answer. Why is it so hard to understand another person's point of view?

I think we all get kind of lost in our own world sometimes and everybody has problems and we kind of get so sucked up into all the things that are stressing us out or causing us misery, suffering, and pain and we forget that there's lots and lots of other people in the world who have their own issues going on.

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. Everybody's shoes. All we can do is really listen, empathize, and try to think again about how our original beliefs differ from someone else's beliefs. So this is one of the most fun thing about Financial Samurai is that I can put out something, share my opinions, and then get feedback from as many people who want to share as possible, hopefully in a respectful way, so that I can shine lights on my blind spots and have these aha moments.

That's actually really exciting to me. So please, if you disagree with me, please let me know. Obviously in a respectful manner, but please let me know. I'm not gonna attack your opinions. I'm gonna ask more about your background and why you think the way you do so we can come to better decision-making.

This is part of the thesis in my book, "By This, Not That." Coming to better optimal decisions with a 70% probability and confidence that we'll get it right and while having the humility knowing that, you know, 20-30% of the time, hopefully not much more than 30% of the time, we're gonna get it wrong, but when we do, we learn from our mistakes.

So we can make better decisions going forward. Alright, everyone. Thanks for listening to this latest episode. If you enjoyed it, please leave a positive 5-star review with some commentary to share your thoughts. Please share this episode with your friends and family because if you enjoyed it, I'm sure they will enjoy it too.

And if you want to support our work, check out financialsamurai.com/bythisnotthat and don't forget to subscribe to the newsletter at financialsamurai.com/news. Thanks so much. Take care, everybody. Bye-bye, everybody.