Inflation, shminflation

[Nords]

Better than average market returns by far, but after deducting management fees and transaction costs it was a tremendous money losing investment!

I think returns improve with additional research.

I don't think it's worth hiring professionals, but you could consider selling options...

Hey, don't "dis" the Corelware! They are still our daily dishes (though we've bought several sets so we only need to run the dishwasher every few days). They look okay, stack well to save space, are almost unbreakable--perfect!

Yeah, no kidding!

If you stick to the more popular Corelle patterns and patrol Goodwill monthly, then you'll be able to keep picking up spares for less than a buck each.

 

[Dreamer]

Hey, don't "dis" the Corelware! They are still our daily dishes (though we've bought several sets so we only need to run the dishwasher every few days). They look okay, stack well to save space, are almost unbreakable--perfect!

+1, except they are our only dishes. I gave the other ones away. I really like Corelware.

 

[btbw2380]

I think this is one of the most important posts I could read here. Assumed inflation is such a big driver in so much we are taught to consider when planning, saving and investing. I've experienced what so many others have posted, little to no rise in expenses and it's great to hear so many others have been able to manage their lives to achieve similiar results. I remember buying my desktop about 12 years ago for $1000 and recently bought a laptop that is so much more powerful for $300. Years ago if a car made it to 100k it was a big deal, my last Honda made it close to 300k. I know a lot of the results have to do with the mindset on this forum but that's just fine with me as I'm drinking the Kool-Aid.

 

[REWahoo]

I know a lot of the results have to do with the mindset on this forum but that's just fine with me as I'm drinking the Kool-Aid.

You are buying generic brand Kool-Aid at wholesale, right?

 

[Meadbh]

I think this is one of the most important posts I could read here. Assumed inflation is such a big driver in so much we are taught to consider when planning, saving and investing. I've experienced what so many others have posted, little to no rise in expenses and it's great to hear so many others have been able to manage their lives to achieve similiar results. I remember buying my desktop about 12 years ago for $1000 and recently bought a laptop that is so much more powerful for $300. Years ago if a car made it to 100k it was a big deal, my last Honda made it close to 300k. I know a lot of the results have to do with the mindset on this forum but that's just fine with me as I'm drinking the Kool-Aid.

It's true that the reliability of automobiles has greatly improved, so the life cycle cost has gone down. Electronics have become significantly cheaper, assuming you are replacing like with like. Your desktop is now so much cheaper because it is no longer leading edge product, but a commodity. If you want the latest iPad, eReader, etc, etc. you will be spending money that you couldn't spend 12 years ago because they didn't exist. I guess as we age we are less to be early adopters of new technology. When it comes to home furnishings, there is a peak in the early years of home ownership and the wear and tear of family life, and when the kids leave, suddenly nobody is jumping on the sofa anymore, so it will do for another few years! I definitely see myself becoming less acquisitive as time goes by.

 

[Mulligan]

I think this is one of the most important posts I could read here. Assumed inflation is such a big driver in so much we are taught to consider when planning, saving and investing. I've experienced what so many others have posted, little to no rise in expenses and it's great to hear so many others have been able to manage their lives to achieve similiar results. I remember buying my desktop about 12 years ago for $1000 and recently bought a laptop that is so much more powerful for $300. Years ago if a car made it to 100k it was a big deal, my last Honda made it close to 300k. I know a lot of the results have to do with the mindset on this forum but that's just fine with me as I'm drinking the Kool-Aid.

I think we are in this thread probably intermingling inflation with spending restraints but the bottom line is what you spend not the inflation rate. The only variables long term that I truly believe could concern me inflation wise are healthcare, heating, cooling, and food. The rest of them, I feel like I can control. Since I have natural gas, that appears to be one less inflation worry. Food occupies about 7% percent of my budget, so even if that doubles, it still wont be a lot. Of course I could just eat more of that government subsidized starchy food products that will always be cheap that was discussed in an earlier thread

 

[btbw2380]

I think we are in this thread probably intermingling inflation with spending restraints but the bottom line is what you spend not the inflation rate. The only variables long term that I truly believe could concern me inflation wise are healthcare, heating, cooling, and food. The rest of them, I feel like I can control. Since I have natural gas, that appears to be one less inflation worry. Food occupies about 7% percent of my budget, so even if that doubles, it still wont be a lot. Of course I could just eat more of that government subsidized starchy food products that will always be cheap that was discussed in an earlier thread

I agree about the intermingling but the important takeaway for me is that many others are able to modify their spending, a lot of it using substitution, without negatively impacting their quality of life. It give me more confidence that whatever I encounter, I'll be able to continue to "manage" inflation.

 

[Walt34]

Hey, don't "dis" the Corelware!

Heavens no!

We still have and use some Corelware. The stuff is practically indestructible and apparently will last a lifetime. I used the word "cheap" in the sense of meaning low cost, not low quality.

 

[Danmar]

This thread is encouraging. I agree there has been disinflation in some things such as autos and electronics. Food costs inflate unless you substitute. Energy costs are certainly going up but cars get better mileage. Property taxes are a big expense for us and they are inflating at over 5% per year. Travel costs are controllable but you have to work hard sometimes to keep them from increasing. So it is very personal. It is left to be seen whether we spend less as we age - haven't noticed this yet but I am only 62 and the DW 55. I am also worried that we might be in for quite high inflation at some point given the fiscal issues the US faces. Canada may fare better. Bottom line like someone upthread said, I am setting a place but if he doesn't show that's OK.

 

[marko]

I originally posted/agreed that inflation was not a big factor (lots of stuff is now cheaper than 20 years ago).

BUT....what about things you are paying for now that you weren't years ago: cable TV, internet access, cell phones, (here in the NE: air conditioning) etc etc.

Ok, ok, I know these are 'controllable' costs and do add to the quality of life, but for most of us, there is about a $150-$200 per month more that is paid out vs 20-30 years ago.

Sort of an inflation, no?

 

[MichaelB]

I originally posted/agreed that inflation was not a big factor (lots of stuff is now cheaper than 20 years ago).

BUT....what about things you are paying for now that you weren't years ago: cable TV, internet access, cell phones, (here in the NE: air conditioning) etc etc.

Ok, ok, I know these are 'controllable' costs and do add to the quality of life, but for most of us, there is about a $150-$200 per month more that is paid out vs 20-30 years ago.

Sort of an inflation, no?

These are not inflation, they are increases in the standard of living. I recall an estimate of around 1% per year in standard of living increase, which would be significant for an ER.

 

[marko]

Agreed that it's not inflation per se, but it is an increase in the COL. An indirect, societal 'inflation' of sorts.

Sometimes I overthink things.............

 

[MichaelB]

Agreed that it's not inflation per se, but it is an increase in the COL. An indirect, societal 'inflation' of sorts.

Sometimes I overthink things.............

This is one I'll debate. Not inflation of any type. This is new consumption that increases your standard of living while inflation is a higher price for basically the same standard as before.

It does highlight an important part of one's financial planning for ER, because over long periods of time the cost to stay current with standard of living improvements can be substantial.

 

[FinanceDude]

No inflation in grocery costs? I beg to differ, pull out some of those receipts from 2 years ago, and you tell me............

 

[marko]

This is one I'll debate. Not inflation of any type. This is new consumption that increases your standard of living while inflation is a higher price for basically the same standard as before.

It does highlight an important part of one's financial planning for ER, because over long periods of time the cost to stay current with standard of living improvements can be substantial.

Ok. Wasn't looking for a debate --that must be two doors down ---, just offering my (miguided) thoughts.

 

[Mulligan]

I originally posted/agreed that inflation was not a big factor (lots of stuff is now cheaper than 20 years ago).

BUT....what about things you are paying for now that you weren't years ago: cable TV, internet access, cell phones, (here in the NE: air conditioning) etc etc.

Ok, ok, I know these are 'controllable' costs and do add to the quality of life, but for most of us, there is about a $150-$200 per month more that is paid out vs 20-30 years ago.

Sort of an inflation, no?

No doubt there is inflation, but the substitution factors really help me. In 1987 I lived off of a $900 budget. Today I spend about $3500 monthly. My rent was $155 then but I was living in a senior citizens duplex complex (What a hoot, a 22 year old guy living around a bunch of 70 year old women. They wanted the place rented and they knew I would be quiet and I wanted the cheap rent). So back out todays mortgage and child support, Im really spending about $2000 a month versus $750, 25 years ago. The variables of what I spend on have changed though. I was still kind of living the spartan college life after school. I didn't even have a/c those 3 years I was in that apartment and we are talking about hot midwestern summers. I will probably pay $200 on a/c just this month alone living in the same state.

 

[Mulligan]

No inflation in grocery costs? I beg to differ, pull out some of those receipts from 2 years ago, and you tell me............

I will agree with you there, too. Thankfully food is a small part of my budget, so it doesnt hit me much. Cable, I paid $12 in 1987, and now its a $100, so that is real. Now if they would just let me pick my channels to pay for, I might get back to $12 a month. Deflation- NFL Sunday Package was over $300 last year, now it will be $199 this year. Let the games begin!

 

[MichaelB]

Ok. Wasn't looking for a debate --that must be two doors down ---, just offering my (miguided) thoughts.

I was . Sorry, couldn't resist.

Seriously, you raise a very important point because someone who retires early needs to be financial prepared not just to face inflation but to watch decades of improvements in overall standard of living and either pay for it or watch others enjoy it. Retirement caclulators don't help much there. Regardless of what it is called, if you want to retire with a standard of living that is constant with the rest of society, that means your budget may need to grow above inflation.

 

[grasshopper]

I don't have cable, I don't have an I-anything. My only splurge is Sirius, because I can't understand what they are singing about on the mexican radio stations. My std of living may be going down. except I am happier than ever without those things.

 

[Focus]

Seriously, you raise a very important point because someone who retires early needs to be financial prepared not just to face inflation but to watch decades of improvements in overall standard of living and either pay for it or watch others enjoy it. Retirement caclulators don't help much there. Regardless of what it is called, if you want to retire with a standard of living that is constant with the rest of society, that means your budget may need to grow above inflation.

That's the bottom line, isn't it? I really appreciate the based-on-life-experience discussion that's flowed from my post. I'm now convinced that the personal rate of inflation can, in fact, be much lower than the CPI, primarily because of technological advances, market forces, substitution and frugality. It makes me more optimistic about my post-retirement financial estimates.

But, and it's a big "but," certain additional costs (and regular ones at that) will appear as the overall standard of living increases. Some might be easy to forgo (an iPad, for instance) but others not so much. And that's harder to plan for, since we don't know what's around the corner.

It seems, inevitably, that's where we always end up. We try to quantify and estimate to a granular level, but in the end the unknown will always be big enough to swing us from success to failure (or, as I prefer to think, vice versa). And that's why we overshoot. If we factor in a 3% rate of inflation and experience only 1%, we've just provided ourselves with a nice buffer.

 

[ejman]

No inflation in grocery costs? I beg to differ, pull out some of those receipts from 2 years ago, and you tell me............

Well, I pulled out my receipts (via Quicken) and here are my grocery expenditures starting in 2007

2007 - $6,811
2008 - $6,722
2009 - $5,467
2010 - $5,939
2011 - $6,880
2012 - $3,112 ( 1/2 year)

We eat pretty much the same, in the same community since 1999 with nothing much changed in our way of life. Interesting though that there was a dip in 2009 and less so in 2010. I wonder if we were doing some subconscious
substitutions (particularly in 2009) since the end of the world was at hand.

 

[Meadbh]

I was . Sorry, couldn't resist.

Seriously, you raise a very important point because someone who retires early needs to be financial prepared not just to face inflation but to watch decades of improvements in overall standard of living and either pay for it or watch others enjoy it. Retirement caclulators don't help much there. Regardless of what it is called, if you want to retire with a standard of living that is constant with the rest of society, that means your budget may need to grow above inflation.

Yes, but there might also be things you no linger do. For example, what is the current cost of your horse and buggy?

 

[grasshopper]

Well, I pulled out my receipts (via Quicken) and here are my grocery expenditures starting in 2007

2007 - $6,811 Grasshopper Family
2008 - $6,722 $8,283
2009 - $5,467 $8,615
2010 - $5,939 $8,033
2011 - $6,880 $7,138
2012 - $3,112 $3,389 (1/2 year)

We eat pretty much the same, in the same community since 1999 with nothing much changed in our way of life. Interesting though that there was a dip in 2009 and less so in 2010. I wonder if we were doing some subconscious
substitutions (particularly in 2009) since the end of the world was at hand.

Ditto grasshopper

 

[jerome len]

there is a real difference between inflation and living expenses. Many of you, since you're great shoppers and have time to look for deals have spent years without an increase in living expenses.

Some on the other hand have experienced both inflation and increased living expenses. Gas is about $3.50 a gallon.....ten years ago it was much less. The price of food has gone up, especially fresh veggies and fruit. Livestyle's have changed. Last week I spent $37.00 at the supermarket, this morning I saw a chubby guy in his 40's spent $41.00 at Starbucks.....I spent $1.90 on a small bold coffee. If a MacDonalds would have been nearby I would have just spent a buck. College....for grandkids....really has seen inflation......much more expensive that my youngest that finished just a few years, ago. And, I'm able so I'm helping pay for it. Have you checked out the price of a new mid size Toyota.....much more expensive and people are buying them.....I'm with somebody above, looking at a Kia Optima......less money than the Toyota.

So, my budget is up, I can afford it. yet, I buy house brands, skip the expensive Latte's at Starbucks, love less expensive Italian and Mexican restaurants....all things I don't mind giving up. Don't forget that the government would love to lower our Social Security inflation cost of adjustments each year...Do all of you think that should happen?
I'm lucky, I have my health, my family and enough to live on comfortably.....some call me cheap, some would think I waste money. I love the "cheapstate" idea forum....I love to save wherever and whenever I can. Keep the ideas coming but we do have inflation.....and, we can adjust our lifestyle expenses....great day to all!!!!!

 

[Independent]

I was . Sorry, couldn't resist.

Seriously, you raise a very important point because someone who retires early needs to be financial prepared not just to face inflation but to watch decades of improvements in overall standard of living and either pay for it or watch others enjoy it. Retirement caclulators don't help much there. Regardless of what it is called, if you want to retire with a standard of living that is constant with the rest of society, that means your budget may need to grow above inflation.

Interesting observation.

This is enshrined (kind of) in Social Security, where the initial benefit is indexed to wages but the after-retirement benefits are indexed to CPI. They assumed that wage growth would exceed CPI growth. So they said you don't go backward on the day you retire, but you don't get future real increases, either.

Certainly my folks didn't feel like they needed all the new stuff after they retired. I can't think of any specific improvement in their lifestyle. But, I can imagine younger retirees - say retired at 45 - feeling that they aren't keeping up if they can't afford new stuff.