Author Topic: How Are YOU Successfully Beating Inflation?  (Read 50084 times)

windytrail

  • Stubble
  • **
  • Posts: 224
  • Location: Seattle, WA
How Are YOU Successfully Beating Inflation?
« on: April 22, 2022, 03:35:53 PM »
There is a lot of negative energy going around about inflation so it's time for a few shots from the Optimism Gun. This thread is for Mustachians to share what they are doing successfully to avoid seeing their everyday costs rise as much as the typical inefficient consumer. I will start:

1. Living in a municipality with rent control. Our landlord was only able to raise our rent by 2.1% this year, which is pretty great. IMO, rent control is an underappreciated factor for deciding where to live.

2. Being car-free or car-light. Not only have the prices of automobiles skyrocketed over the past two years, but also the price of gasoline. On the other hand, walking is still free and my local bus ride is still only $2.50.

3. Striving for a low carbon footprint. Apart from transportation, this means living in a space smaller than I can afford, and which is less expensive to heat or cool. Using less energy means my home energy costs are hardly rising.

4. Buying organic and whole foods. This is only anecdotal, but it seems like the cost of organic and "free range" foods is not increasing at the same rate as conventional foods. For example, I just bought a dozen cage-free eggs from Trader Joe's for $2.99, same price as it's been for several years. A 50lb bag of oats was still only $40 from Azure Standard. Other foods have gone up more, e.g. almonds are $5.99/lb when they used to be $4.99, but still not enough to make a dent in the budget. Overall, I'm not seeing a big difference at the grocery store compared to restaurants and bars, which have all raised their prices considerably in the past several years.

What are you doing to successfully beat inflation?

Dr. Pepper

  • Stubble
  • **
  • Posts: 139
Re: How Are YOU Successfully Beating Inflation?
« Reply #1 on: April 22, 2022, 03:57:28 PM »
Wouldn't say we are beating, but offsetting it somewhat by owning real estate conservatively financed, equity in royalty companies, some gold and earning power from our jobs. Cut way back on eating out which is our biggest discretionary expense. Also avoiding buying new vehicles for the time being.

afox

  • Pencil Stache
  • ****
  • Posts: 571
Re: How Are YOU Successfully Beating Inflation?
« Reply #2 on: April 22, 2022, 05:44:54 PM »
Point number 4 is correct. This was discussed on planet money a few days ago:
https://www.npr.org/transcripts/1092447326

Since I buy cheap food in the form of unprocessed raw ingredients like rice, beans, oats, milk, eggs, nuts, etc my prices have gone up considerably. If I lived off of handmade organic rice cakes my prices would have gone up much less. This increase has to be taken with a grain of salt though because if you're eating fancy food you were already spending multiple times for your groceries than I was. Even with 20% increase in the price of my non-organic beans and rice Im spending way less money on food than a fancy food consumer.

 transcript:

WONG: The third reason inflation hits lower-income folks harder has to do with the kinds of things people buy. And let's just focus on food because food is a big chunk of the CPI basket that's driving up inflation right now.

MA: And here's an important thing just to keep in mind when we talk about how the price of food is tracked by CPI. The food categories in the CPI basket, they don't actually differentiate between, let's call it, the fanciness of the product.

WONG: Like how black tie your groceries are?

MA: Yeah, exactly. You know, there are not separate categories for, you know, organic free-range eggs versus standard factory farm eggs. Instead, all these products are thrown together in the same basket, which is used to calculate the consumer price index. And Xavier says that's a problem.

JARAVEL: Even if you just look at food products, the types of food products that the low-income buy actually had higher inflation rates.

WONG: So think the not-premium products - regular oranges and regular eggs. Xavier found these products got more expensive over time.

MA: And counterintuitively, that did not happen for the fancier stuff - you know, the stuff that people with higher incomes were more likely to buy.

WONG: You know, like fancy mustard where you can see the individual, like, little grains in there versus just, like, the stuff in, like, a big yellow plastic bottle.

MA: Like the small batch artisanal granola.

WONG: Or like the really fancy tuna that says it's, like, pole caught by fishermen wearing white gloves. I don't know how they catch the tuna.

MA: Yeah, or the pasture-raised kombucha.

WONG: (Laughter) Yeah. Xavier says prices for these types of products - the fancy mustard, the bespoke tuna - have actually dropped over time. In other words, they've experienced deflation. And a big reason for the expensive stuff actually getting cheaper has to do with growing wealth inequality.

JARAVEL: If you have the rich getting richer, that creates growing markets for luxury products, premium products, and so you look at organic products. Organic food in the U.S. has had deflation for years because you have more and more supply of organic food. More and more farmers change their farms and get the USDA labels for organic products. That brings competition up. That brings prices down.

MA: And so more companies were sprouting up to compete for the dollars of these affluent consumers. Xavier says that was less the case for the less premium products. So an example he gives from his research is that in 2004, the cost of organic spinach was 60% higher than the regular stuff. But a decade later, that difference in price shrank to just 7%.

WONG: So the price of fancy spinach went down at the same time that the price of non-fancy spinach went up.

remizidae

  • Bristles
  • ***
  • Posts: 289
Re: How Are YOU Successfully Beating Inflation?
« Reply #3 on: April 22, 2022, 05:50:58 PM »
I took out a ton of debt in 2021–new car and first house purchase. But now, I’m feeling pretty good about having low-interest fixed-rate debt, and I’m not planning to pay it off early.

We have increased grocery spending, but I’ll have to live with that for the moment.

ixtap

  • Magnum Stache
  • ******
  • Posts: 4561
  • Age: 51
  • Location: SoCal
    • Our Sea Story
Re: How Are YOU Successfully Beating Inflation?
« Reply #4 on: April 22, 2022, 05:52:03 PM »
Since most of my list involves changing lifestyle, we don't beat inflation so much as side step it.

We will be moving back onto our boat this year. We won't exactly avoid rent, as we will be spending more on travel for at least the next six months, but since we live in a HCOL, no rent will buy us a lot of travel. Meanwhile, I don't visit the boat as often as I used to, since it is a pretty long drive.

We are eating less and less red meat. We have foregone lamb entirely since the price sky rocketed early in the pandemic, but we are eating more and more plant based since trying to feed all of our guests over the last two months without increasing food costs. We have not cut back on seafood, however.

DH tutors children in coding for ridiculously cheap, so one of the parents supplements actual pay by giving us eggs from their backyard chickens every once in awhile. Particularly useful these days with the avian flu driving up the costs.


secondcor521

  • Walrus Stache
  • *******
  • Posts: 5503
  • Age: 54
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: How Are YOU Successfully Beating Inflation?
« Reply #5 on: April 22, 2022, 07:18:11 PM »
I was already a very efficient consumer, because I've gone over my budget a zillion times with a fine toothed comb over the past three decades.  As a result, I was already not spending much, and what I was spending was on stuff I valued, and generally in the most efficient manner possible.  So I'm exposed more to inflation than the average person on the one hand because I generally don't have any large inefficiencies to wring out of my system.  On the other hand, I'm already spending Not Very Much, so 8% more of Not Very Much is Still Not Very Much.

Beyond that, I've been more than 90% invested in US stocks since at least 1987.  While stocks haven't done well the past few months, over the longer term I think they do a good job of beating inflation, and will continue to do so.  So that's another thing I do which I view as a long term success.

I don't have any fixed interest rate debt, which is generally fine with me, but if I had had any at a low interest rate I would have kept it.  I'll probably advise my kids to keep their mortgages for the full term rather than pay them off, even though I had my reasons for doing at the time which are still valid - mostly the fact that my FIRE date was right before my kids' college timeframes, and lower AGI has positive impacts on FAFSA and ACA subsidies.  I haven't done the math on this but I think I'm still ahead of the game.

In response to gas prices, I've installed USAA Safe Pilot and Get Upside apps on my phone.  It's not much, but the hassle is pretty easy.

I got the Fidelity 2% cash Visa card in my last app spree.  2% cash back goes into my FSA, which equates to 2.67% with the tax benefits because for every dollar I put into my FSA I can Roth convert a dollar at a 0% tax rate.

Other than those few limited things, I don't really worry about inflation much because I think the Fed will be successful.  Yes, we might have a mild recession, but that might be a good time for my oldest to buy his first house and I think I'm also fairly recession-proof.

Villanelle

  • Walrus Stache
  • *******
  • Posts: 6657
Re: How Are YOU Successfully Beating Inflation?
« Reply #6 on: April 22, 2022, 07:26:50 PM »
The single biggest thing is probably that I signed a three year lease with no increases.  With rents going up 20% last year, and likely much more than that this year if trends continue, my fixed housing costs are a pretty sweet deal.  We've got 2 years left on the lease.  One year in, we

Then there are things like the fact that I drive very little.  But I'm not sure that is really 'beating inflation' because I'm not changing anything so inflation, as a % of that line item, is affecting me just as much as it affects someone who drives 5x as much.

That said, I am going to try to convince DH to drive my car sometimes when he got to the far away work location.  He gets reimbursed (based on mileage), but it would be cheaper to drive my smaller car.  It probably won't save more than $20/mo though, if that, since his car isn't a gas guzzler either. 

The only thing I can think of that I'm doing specifically to address higher prices is trying to be even more mindful of food waste, which is something I've always struggled with.   Everything else, except the car swap if I can get DH on board, is still I already did.  And some of it doesn't even protect me from inflation, as a % of a line item, compared to anyone else.  I'm not driving less, or buying cheaper gas.  Its just that since I already don't use much gas, seeing that line item go up 20% (or whatever) matters less.

flyingaway

  • Bristles
  • ***
  • Posts: 464
Re: How Are YOU Successfully Beating Inflation?
« Reply #7 on: April 22, 2022, 11:01:47 PM »
Skipping lunches can save money and lose weight at the same time.

poxpower

  • Bristles
  • ***
  • Posts: 390
  • Age: 39
  • Location: Victoria, BC
  • Retired at 35
    • thepoxbox.com
Re: How Are YOU Successfully Beating Inflation?
« Reply #8 on: April 23, 2022, 12:08:15 AM »
Going on a road trip and sleeping in my SUV instead of paying rent lol.

Living alone here ( Vancouver Island ) is now probably 2000$/month is you don't want roommates. That's for an old 1 bedroom in the sketchy part of the island. If I'm gone 5 months that's $10000 I "saved" that I can put towards this trip.

I figure about 5k will go to gas, so that's 5k left for stuff like hotels, ferries, activities, restaurants etc. That's a pretty good discount on an epic vacation. I could not afford both rent and vacation at this point.

When I come back I might still just not pay rent and just go to europe or the USA and share AIRbnbs with friends or something and just bike.

Kris

  • Walrus Stache
  • *******
  • Posts: 7335
Re: How Are YOU Successfully Beating Inflation?
« Reply #9 on: April 23, 2022, 05:46:32 AM »
Having a paid-off house.

Having a paid-off car.

Working from home for myself.

Not looking at the balances of our retirement accounts.

Freedomin5

  • Walrus Stache
  • *******
  • Posts: 6485
Re: How Are YOU Successfully Beating Inflation?
« Reply #10 on: April 23, 2022, 06:14:44 AM »
We have no car.
We live walking/biking distance from work.
Food prices have not gone up significantly because it is regulated by the government, and also we stock up when things are on sale.
Meat has gone up a bit -- so we eat less of it.
Housing is provided by my employer.
We don't eat out -- being locked down in Shanghai helps with that.
We don't travel -- see line above.

I find that, the less you need, the less you spend, so a good way for us to beat inflation is to strive to live more and more simply.

« Last Edit: April 23, 2022, 06:34:30 AM by Freedomin5 »

Cranky

  • Magnum Stache
  • ******
  • Posts: 3842
Re: How Are YOU Successfully Beating Inflation?
« Reply #11 on: April 23, 2022, 06:22:29 AM »
We retired, and moved to a different state, and live in a different household setup than we did a year ago, so I was still getting a feel for what our “normal” spending should be.

Some of the biggest categories for inflation right now are travel, cars, and eating out, and those categories don’t apply to us. Our housing costs are stable. We don’t drive much, so gas prices have a minimal effect. I sure see food prices going up, and on top of random supply chain issues, that’s unnerving.

I’m part of some regular retirement online groups and some people are hit pretty hard. You can argue that they shoulda been better prepared but at 80yo, that’s not very helpful.

knigry01

  • 5 O'Clock Shadow
  • *
  • Posts: 13
Re: How Are YOU Successfully Beating Inflation?
« Reply #12 on: April 23, 2022, 06:39:31 AM »
1.) Having owner equivalent rent tied to very low 15 year note

2.) Company provided car including maintenance/fuel & DW working 100% from home now

3.) Making more money

Ron Scott

  • Handlebar Stache
  • *****
  • Posts: 1126
Re: How Are YOU Successfully Beating Inflation?
« Reply #13 on: April 23, 2022, 07:14:43 AM »
I beat inflation the easy way…

When I retired almost 6 years ago I budgeted based on my last year’s spend and have spent less each year than budgeted so I have an automatic inflation hedge built into my plan! I can carry the savings forward! Plus I quit drinking alcohol and eating red meat before I retired—and I only cheat on the meat, 3-4 times a year.

My overall retirement plan did the job for me and I have no need to cut back on anything.
« Last Edit: April 23, 2022, 07:18:21 AM by Ron Scott »

Omy

  • Handlebar Stache
  • *****
  • Posts: 1727
Re: How Are YOU Successfully Beating Inflation?
« Reply #14 on: April 23, 2022, 07:53:02 AM »
Our real estate equity has gone up WAY more than our spending so that's probably our biggest hedge against inflation. We are also eating fewer calories and healthier foods so while food prices have increased, our food spending has not increased. If anything, we've spent less on food since we're avoiding restaurants for health reasons.

scottnews

  • 5 O'Clock Shadow
  • *
  • Posts: 69
  • Location: Minnesota
Re: How Are YOU Successfully Beating Inflation?
« Reply #15 on: April 23, 2022, 08:35:07 AM »
Food – eggs have quadrupled in price over the last 18 months so buying very few eggs until the avian flu passes.   Eating fewer meats and more beans/lentils, starting homemade bread.  We are still taking a close look at our food purchases to optimize.

House is recently renovated and well insulated.  The highest gas bill was $130 this winter.   The previous high was $90.  Gas heat, range, water heater, clothes dryer

One efficient car family.  Lots of biking to work, around town, etc.

Low flow shower heads, military showers.

I need to setup a clothes line this summer.
« Last Edit: April 23, 2022, 08:37:36 AM by scottnews »

bryan995

  • Pencil Stache
  • ****
  • Posts: 595
  • Age: 37
  • Location: California
Re: How Are YOU Successfully Beating Inflation?
« Reply #16 on: April 23, 2022, 09:09:15 AM »
Job hopping
Both my wife and myself have forced >40% income increases.
Now work fully remote / from home (no commuting cost / wasted time)

Low fixed rate debt
Payments stay the same, measured in 2020 dollars. Bank is taking the “loss”.
Solar and home batteries at 0.99% for 120mo - now immune to utility increases.
New (in demand) EV at 1.2% for 72 mo - has depreciated a wild -25% since buying.
EV is immune to gas price increases (don’t need gas) - pay <0.03c/mile
Cash out refi on home, maximized home leverage at 2.75%, reset 30 year clock.

Home efficiency/improvements
Whole house fan - amazing in SoCal.
Purchased tools to do minor renovations ourselves

Real estate
Primary home has now appreciated >90% since buying in late 2019

Basically trying to tackle only the largest items, fixing costs for the long term, and focusing all remaining energy onto the income side of the equation.
« Last Edit: April 23, 2022, 09:26:04 AM by bryan995 »

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 23129
  • Age: 42
  • Location: Toronto, Ontario, Canada
Re: How Are YOU Successfully Beating Inflation?
« Reply #17 on: April 23, 2022, 09:39:45 AM »
Not carrying any debt, so no worries about rising interest rates.  Only had to fill up our car three times in the past two years, so gas prices haven't really hit home.  Don't really eat out, so restaurant costs aren't a thing we care about too much.  As far as groceries go, we just do what we've always done - buy stuff that's on sale and avoid things that seem too expensive.  This doesn't work for everything (fruit and veggies are a little more expensive), but helps. 

Overall though we haven't been impacted by inflation in any appreciable way so far.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 22320
  • Age: 66
  • Location: NorCal
Re: How Are YOU Successfully Beating Inflation?
« Reply #18 on: April 23, 2022, 09:56:28 AM »
I'm used to shopping in multiple places, because I have a reasonable loop routine. DH had surgery recently and is non-ambulatory. I took him to a medical appointment yesterday and wanted to stop for fresh groceries on the way home. I had something to return at Sam's, so I decided to do all my shopping there. It's a new membership and I've only shopped there once before, so it did not feel familiar. I was also working without a physical list. I bought a couple of splurgy things for DH ($25), some expensive vitamins that were on sale ($30), some bread I know my 97-year-old friend likes ($9), and some quick meal items. I was kind of freaking out about the prices, but I had to get everything in one stop, so I mostly closed my eyes to them and finished up as quickly as possible. In the end, the total was $130, which isn't terrible, it's just the first time I've really felt the pressure of higher prices and it felt weird.

Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!

I'm hoping it all works out in the end, lol.

TomTX

  • Walrus Stache
  • *******
  • Posts: 5345
  • Location: Texas
Re: How Are YOU Successfully Beating Inflation?
« Reply #19 on: April 23, 2022, 11:05:27 AM »

Zikoris

  • Magnum Stache
  • ******
  • Posts: 4536
  • Age: 37
  • Location: Vancouver, BC
  • Vancouverstachian
Re: How Are YOU Successfully Beating Inflation?
« Reply #20 on: April 23, 2022, 11:12:10 AM »
In short, most of the things that are inflating rapidly are things we don't buy to begin with, so we avoid inflation just by doing exactly what we've been doing all along.

Some select things we don't buy:

- Cars, gas, and anything related to cars
- Animal products of any kind
- The vast majority of consumer goods

We also try to get things we need free from our Buy Nothing group, or secondhand. We also both read a ton, and the vast majority of that is from either the library or Kindle Unlimited (which my boyfriend needs for work purposes already). Like if the library had awards for the heaviest users, we would probably win. I would say between the two of us we must check out 50+ items a month.

afox

  • Pencil Stache
  • ****
  • Posts: 571
Re: How Are YOU Successfully Beating Inflation?
« Reply #21 on: April 24, 2022, 10:19:25 AM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.

If you're not familiar with the basic formula, here it is:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/


bryan995

  • Pencil Stache
  • ****
  • Posts: 595
  • Age: 37
  • Location: California
Re: How Are YOU Successfully Beating Inflation?
« Reply #22 on: April 24, 2022, 10:40:38 AM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.

If you're not familiar with the basic formula, here it is:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Exactly right. So the best way to beat inflation (imo) is to increase income at the same rate. Not everyone can do this… Then the percentage you pay towards expenses stays constant, even though the dollar amount increases.

You can also ‘beat’ inflation by having fixed costs (aka mortgage).  Payment stays the same while the value of the dollar erodes.

If you are FIRE and income is already “fixed” given your investments, then I’m not sure what to do :) You can’t ask the S&P to return more so that you can increase SWR from 4% to 5%. The % of income spent on expenses will have to increase unless you consume less.   Perhaps this highlights how valuable having fixed costs truly are — and or overshooting NW to account for a decline in the value of the dollar (which is all but basically guaranteed).
« Last Edit: April 24, 2022, 10:56:35 AM by bryan995 »

Zikoris

  • Magnum Stache
  • ******
  • Posts: 4536
  • Age: 37
  • Location: Vancouver, BC
  • Vancouverstachian
Re: How Are YOU Successfully Beating Inflation?
« Reply #23 on: April 24, 2022, 11:05:02 AM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.

If you're not familiar with the basic formula, here it is:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Eh, not really. What specific things you buy and don't buy has a HUGE impact, because it's not a case of everything going up evenly across the board. A person who drives a lot and eats a lot of meat is getting fuuuucked right now. People like me who eat plants and walk to work are holding pretty steady on expenses. And people who spend 10K are way more likely to have a lifestyle like mine. So yes, people with low expenses are probably experiencing less inflation now.

bmjohnson35

  • Pencil Stache
  • ****
  • Posts: 668
Re: How Are YOU Successfully Beating Inflation?
« Reply #24 on: April 24, 2022, 11:23:10 AM »

- Debt free and we own personal residence

- We don't eat out much and we are eating less meat these days

- Much of what we do for fun isn't impacted (socializing with friends/family, outdoor activities, etc)

- Since I no longer work, wild swings in gas prices don't impact us much and vehicle maintenance is stretched out further

- We have been fortunate that we haven't needed to purchase major items most impacted by inflation.......like home, car and building supplies.

Our costs are increasing, but so far they haven't made any meaningful impact to our lifestyle or spend rate.

Our annual spend budget is under $40k, so even a 10% increase would be less than $4k annually.

Villanelle

  • Walrus Stache
  • *******
  • Posts: 6657
Re: How Are YOU Successfully Beating Inflation?
« Reply #25 on: April 24, 2022, 11:41:11 AM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.

If you're not familiar with the basic formula, here it is:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

This is what I was alluding to in my post, although I don't think it is quite as clear-cut as you state.  Inflation doesn't affect all categories the same, or even all items within a category.  So if housing, for example, is higher than average inflation, then it is going to be worse for a renter on an annual (or monthly) renewal lease than for someone who owns or has a multi-year lease. If eggs are hit harder than beef products, then it is going to be worse for someone who goes through 6 eggs per day than for a vegan.  So while yes, everyone is paying 25% more for eggs, that matters a lot more to the huge egg eater than someone who rarely buys eggs. 

Even just putting off the purchase of a vehicle for another year, in the hopes that prices level off a bit, can be "beating inflation".

Flexibility helps a lot here.  Someone who eats many eggs can switch to beef as a protein source, and "beat inflation" in that sense.  Using this time to finally switch to carpooling or biking can means that even if gas prices are up 20%, your personal gas expenses only go up 10%, or even stay the same.  So there are ways to game things and move expenses from higher inflation items to lower, or to make strategic cuts in areas with higher increase.  We aren't just helpless in the face of higher prices, which we must pay exactly as they come on the things and amounts we were purchasing prior to increase inflation.  We can be--we can do exactly what we had been doing and pay whatever that costs now--but we can also be flexible and strategic and beat at least some of the inflated prices. 

ixtap

  • Magnum Stache
  • ******
  • Posts: 4561
  • Age: 51
  • Location: SoCal
    • Our Sea Story
Re: How Are YOU Successfully Beating Inflation?
« Reply #26 on: April 24, 2022, 11:55:05 AM »
Oh dear, if we are calculating inflation as a ratio of spending to income, we are diving deep into inflation soon by downshifting at work!
« Last Edit: April 24, 2022, 12:00:59 PM by ixtap »

cool7hand

  • Handlebar Stache
  • *****
  • Posts: 1319
Re: How Are YOU Successfully Beating Inflation?
« Reply #27 on: April 24, 2022, 11:59:09 AM »
Inflation helped get us down to one car.

pdxvandal

  • Pencil Stache
  • ****
  • Posts: 501
  • Location: Earth
Re: How Are YOU Successfully Beating Inflation?
« Reply #28 on: April 24, 2022, 12:18:29 PM »
1. Long-term fixed mortgage at 2.75%.
2. Two i-bonds at $20k.
3. Driving less, walking / taking more public transit.
4. Buying index funds every 2 weeks with an added 8% employer contribution.
5. Owning two older cars (2008 and 2009)



MaybeBabyMustache

  • Walrus Stache
  • *******
  • Posts: 5354
    • My Wild Ride to FI
Re: How Are YOU Successfully Beating Inflation?
« Reply #29 on: April 24, 2022, 01:06:31 PM »
We've always prioritized driving our electric car (over our second, gas car), but now we are way more optimized around usage. We charge the electric car for free at work, so it's a huge win. I'm back in the office 3x/week, and get free meals, so that's also helping out slightly with the grocery budget. Kids get lunch for free in our state, so helping to reduce packed lunch costs.

FireLane

  • Handlebar Stache
  • *****
  • Posts: 1328
  • Age: 41
  • Location: NYC
Re: How Are YOU Successfully Beating Inflation?
« Reply #30 on: April 24, 2022, 01:25:42 PM »
The biggest drivers of inflation are cars and houses. I'm not buying either of those right now, so price increases don't affect me. I have a small, efficient apartment that I intend to live in as long as possible, and two old cars (~10 years and ~15 years) that I'm planning to drive into the ground. I want to do some home renovations, but I can afford to wait until the market cools.

Gas prices are up, but I don't drive a lot. I'm retired and my wife works from home four days a week, so commuting costs are minimal, and I walk my son to school. I buy about one tank of gas a month on average. When that goes up from $40 to $60, it pinches a little, but it's not a big hit compared to my overall budget. Plus, it's a valuable reminder to walk more and not to use the car for unnecessary errands!

I genuinely haven't noticed grocery prices going up very much. Organic milk and yogurt have gotten more expensive, but that's about it.  Staples like rolled oats, rice, pasta, olive oil, sweet potatoes, bananas, black beans and tomatoes are still extremely cheap. Even eggs are very reasonable here. I paid $6 for 18 cage-free eggs last week, and I could have gotten them cheaper if I'd gone to Costco.

It may be that the foods experiencing inflation are the ones I don't eat. For example, I never eat red meat at home, so I wouldn't know if it's gotten more expensive.

Chris Pascale

  • Handlebar Stache
  • *****
  • Posts: 1335
Re: How Are YOU Successfully Beating Inflation?
« Reply #31 on: April 24, 2022, 06:38:36 PM »
Does 2 kids in community college count?

Oldest just got her own phone plan and took over her auto insurance.

I used to eat beef nearly every morning, and have been eating more oats after seeing that beans didn't fill me up.

stoaX

  • Handlebar Stache
  • *****
  • Posts: 1008
  • Location: South Carolina
  • 'tis nothing good nor bad but thinking makes it so
Re: How Are YOU Successfully Beating Inflation?
« Reply #32 on: April 24, 2022, 07:13:53 PM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat. 

MoseyingAlong

  • Bristles
  • ***
  • Posts: 417
Re: How Are YOU Successfully Beating Inflation?
« Reply #33 on: April 24, 2022, 08:07:38 PM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Unless you own property in California like Dicey, in which case Prop 13 severely restricts increases in property tax.

bmjohnson35

  • Pencil Stache
  • ****
  • Posts: 668
Re: How Are YOU Successfully Beating Inflation?
« Reply #34 on: April 24, 2022, 10:08:57 PM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Many states have built in protection against wild swings in your real estate taxes for primary residence, if you are homesteaded.  I have read some states limit real estate tax increases to a certain percentage, like 10% annually, some limit to actual inflation rate for the year. I think I read California specifically limits it to 2% increase annually, but I'm not sure of that.  In theory, you could own a 1.5M home in Cali and as long as you have owned it long enough, may only be paying $3-$5K in taxes.

HPstache

  • Magnum Stache
  • ******
  • Posts: 2859
  • Age: 37
Re: How Are YOU Successfully Beating Inflation?
« Reply #35 on: April 24, 2022, 10:40:55 PM »
Locked in 3.375% 30yr mortgage (about $1,000/mo!).  Two paid off 2000's vehicles and working 2 miles from work.  Backyard chickens which eat mostly food scraps.  Ramping up my sides gigs and increasing prices on my products to reflect inflation/supply chain issues.  Increased our duplex tenant rents by 10%.  Started mowing the lawn at our rental vs. Paying to have it done.

That being said, inflation is real and still hitting us hard on groceries, fuel ( a couple of long distance camping trips planned, ouch!), and items for keeping up our home.
« Last Edit: April 24, 2022, 10:52:49 PM by v8rx7guy »

Fru-Gal

  • Handlebar Stache
  • *****
  • Posts: 1200
Re: How Are YOU Successfully Beating Inflation?
« Reply #36 on: April 24, 2022, 11:09:37 PM »
Weird, we live in a VHCOL area but haven't noticed food prices increasing. Gas, of course, but the solution to that is we drive very little -- less than we were driving before. All household commutes are by bike.

moof

  • Pencil Stache
  • ****
  • Posts: 809
  • Location: Beaver Town Orygun
Re: How Are YOU Successfully Beating Inflation?
« Reply #37 on: April 25, 2022, 12:06:24 AM »
40% of our spend is mortgage, which is fixed. 
Food seems more expensive in the store, but somehow the shopping runs are costing about the same.  Whatever the increase is, it is not bothering me, or I am subconsciously adapting.
We average less than 5k miles driving our ICE car, which works out to only $500 a year spending, so 10-20% increase really barely affects us.
Personal miscellaneous spending is on a fixed biweekly transfer, and neither of us has needed it increased so far.

So really I have not noticed much, or have at least adapted without noticing.

TomTX

  • Walrus Stache
  • *******
  • Posts: 5345
  • Location: Texas
Re: How Are YOU Successfully Beating Inflation?
« Reply #38 on: April 25, 2022, 07:14:54 AM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Many states have built in protection against wild swings in your real estate taxes for primary residence, if you are homesteaded.  I have read some states limit real estate tax increases to a certain percentage, like 10% annually, some limit to actual inflation rate for the year. I think I read California specifically limits it to 2% increase annually, but I'm not sure of that.  In theory, you could own a 1.5M home in Cali and as long as you have owned it long enough, may only be paying $3-$5K in taxes.

Here in Texas they recently added another layer of protections - the homestead cap of 10% tax increase per year protects you from really wild swings, but by itself it would mean your taxes could double every 7 years.

However, a couple of years ago Texas decided to limit local governments to increasing their total property tax collections on existing properties to 3.5% per year, unless they have a local election allowing more. New construction doesn't count toward the 3.5%.

This means while my tax valuation may go up 10% a year, my actual tax bill should not go up more than about 3.5%

https://www.texastribune.org/2019/06/12/abbott-signs-property-tax-bill-sb2/

engineerjourney

  • Bristles
  • ***
  • Posts: 453
  • Age: 36
Re: How Are YOU Successfully Beating Inflation?
« Reply #39 on: April 25, 2022, 07:25:38 AM »
We have a fixed mortgage @2.7% and a car loan at 0% (could have paid cash but come on 0%!).

I did notice my newest bill for auto and home insurance was up almost 10%.. I'll ask my broker to shop around but the $200 increase on the home side citied increased replacement costs which I can believe.... damn it.  At least it is only like a $20 total increase a month if I break it down. I'm not looking to the new property tax bill, especially since my state charges property tax on cars too.. sigh.

I actually checked egg prices this weekend and it was $3.79 for 2 dozen at Costco which is pretty much what we had been paying I think.

I could change employers to try to beat inflation that way but I'm too tired to think about it right now!

Villanelle

  • Walrus Stache
  • *******
  • Posts: 6657
Re: How Are YOU Successfully Beating Inflation?
« Reply #40 on: April 25, 2022, 09:20:19 AM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Many states have built in protection against wild swings in your real estate taxes for primary residence, if you are homesteaded.  I have read some states limit real estate tax increases to a certain percentage, like 10% annually, some limit to actual inflation rate for the year. I think I read California specifically limits it to 2% increase annually, but I'm not sure of that.  In theory, you could own a 1.5M home in Cali and as long as you have owned it long enough, may only be paying $3-$5K in taxes.

While I don't know her exact property taxes, this is my situation.  Only it's even better than that.  In addition to limiting increases, Prop 13 allows you to essentially purchase the tax basis if you buy from a parent.  My sister bought our family home when my parents moved to their retirement destination.  Parents purchases in ~1987, so sister has the 1987 tax basis (plus the small annual increases) on the home that she bought in the mid-00s.  I think my parents paid 295k, my sister paid 850k-ish, and it is worth well over a million now, but that basis is still that 295k+ limited annual increases. 

It's the primary (perhaps only) reason she bought the home, because it is a larger home she she needed for just her and her spouse.  But it was cheaper to buy it, with the low property taxes, than to buy a cheaper home and pay the actual 200X property tax rate. 

bryan995

  • Pencil Stache
  • ****
  • Posts: 595
  • Age: 37
  • Location: California
Re: How Are YOU Successfully Beating Inflation?
« Reply #41 on: April 25, 2022, 10:09:04 AM »
Everyone is always boo-hoo-ing CA real estate for being expensive, unaffordable, etc -  but over the medium to long term, it may very well be the cheapest (and best!) place to live. Certainly a good place to fix costs for retirement.   And you can’t beat the weather !

It’s only been 28 months, and already we pay a 811k tax basis on a 1.6M (estimated) home. Already half of what we would pay if buying today. Couple that with a <3% 30 year mortgage and no temptation to ever pay extra, you have yourself a real FIRE winner. It also means that it would be very non-economical to ever move and reset basis/mortgage … so glad we bought larger with room to grow (3 kids).   

Though I do suspect prop13 cannot go on forever. Something will need to be done at some point :)
« Last Edit: April 25, 2022, 10:26:22 AM by bryan995 »

Weathering

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: How Are YOU Successfully Beating Inflation?
« Reply #42 on: April 25, 2022, 10:27:33 AM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Many states have built in protection against wild swings in your real estate taxes for primary residence, if you are homesteaded.  I have read some states limit real estate tax increases to a certain percentage, like 10% annually, some limit to actual inflation rate for the year. I think I read California specifically limits it to 2% increase annually, but I'm not sure of that.  In theory, you could own a 1.5M home in Cali and as long as you have owned it long enough, may only be paying $3-$5K in taxes.

I’m in CA, and yes the property tax annual increases are limited to 2%. However, they are also limited to 2% for landlord’s and corporate property. The examples of $3k annual property tax on a $1.5M home are small potatoes compared to the $70k property taxes on $600M buildings - because buildings never really get sold (the business entity that owns the building gets sold or merged into another). Landlords can even pass their rental property down through the generations without getting a new property tax assessment.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 22320
  • Age: 66
  • Location: NorCal
Re: How Are YOU Successfully Beating Inflation?
« Reply #43 on: April 25, 2022, 11:14:25 AM »


Counterpoint: Yesterday morning, Zillow fed me a seemingly random Zestimate on one of our rentals. It's "up" $15k since I checked it earlier this month. $15k in less than a month, on just one property. Yikes!


The downside of increasing property values are increasing property taxes.  That's been an aspect of inflation that I have not been able to beat.

Many states have built in protection against wild swings in your real estate taxes for primary residence, if you are homesteaded.  I have read some states limit real estate tax increases to a certain percentage, like 10% annually, some limit to actual inflation rate for the year. I think I read California specifically limits it to 2% increase annually, but I'm not sure of that.  In theory, you could own a 1.5M home in Cali and as long as you have owned it long enough, may only be paying $3-$5K in taxes.

I’m in CA, and yes the property tax annual increases are limited to 2%. However, they are also limited to 2% for landlord’s and corporate property. The examples of $3k annual property tax on a $1.5M home are small potatoes compared to the $70k property taxes on $600M buildings - because buildings never really get sold (the business entity that owns the building gets sold or merged into another). Landlords can even pass their rental property down through the generations without getting a new property tax assessment.
That is my understanding as well. In fact, Prop 13 was not to protect little old ladies from losing their homes due to rising taxes. It was a ploy to reduce taxes on commercial property. Corporations (such as Insurance Companies, for example) build something like a mall, office or apartment complex. Later, they sell a 49% interest to someone else and the original tax basis rolls over to them. It's a total scam.  These are fuzzy numbers, but when Prop. 13 passed, corporate taxes accounted for about 2/3 of the tax revenue. Now, corporate property taxes are about 1/3, with individual homeowners shouldering 2/3 of the tax burden. Nice, huh?

Ron Scott

  • Handlebar Stache
  • *****
  • Posts: 1126
Re: How Are YOU Successfully Beating Inflation?
« Reply #44 on: April 25, 2022, 12:36:03 PM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.


Real FINANCIAL INDEPENDENCE requires that you are capable of handling quite a bit of variability with respect to market conditions, unexpected expenses, and INFLATION.

If your probable-case financial model shows you can spend $Y per year and you are doing everything you want at Y * .7, for example, you’re FI.

But if you’re going to have to cut back on stuff that are part of your basic spend and get nervous about a few years of high inflation you’re not really FI.

eyesonthehorizon

  • Handlebar Stache
  • *****
  • Posts: 1001
  • Location: Texas
Re: How Are YOU Successfully Beating Inflation?
« Reply #45 on: April 25, 2022, 12:59:58 PM »
Our spending is pretty efficient after a decade of practice, so the tweaks have been minor.

We got lucky in a sense & ran out of wheat flour near the end of the year, then restocked, so we haven't been touched by prices there yet; we bake much less in the hot months, so I expect it will last us a while. Increased our consumption of legumes a bit, with more rice. Using the pressure cooker instead of the stove keeps the house cooler. We only buy meat very irregularly & I've stopped using eggs for anything but extended recipes (enriched dough but no eggy breakfasts.) Might experiment with canned milk if I miss any recipe too much. Enjoying soups while it's still cool enough to justify heating so much water in the house, might cook outside more this summer pending a mosquito solution. I love the convenience of coldbrew coffee but it uses more beans; coffee prices are on a marked increase since last summer, so I've moved back toward plunging over ice if I want an iced coffee. As ever, we cook what's on sale. I was surprised to see the cost of carrots & celery make a jump while canned tomatoes sat still, so we're eating more cabbage & potato curry than trinity-based pasta dishes.

Our preferred luxury is housing with a clownishly average footprint, but this hardly impacts our energy use thanks to improved location & lifestyle design; we've been enhancing insulation & we accept a very wide range of indoor temperatures in exchange for the space. I also lucked out in signing a new fixed-rate green electric contract just before a certain ex-KGB walking ego decided to cement his infamy, so our electric bills are laughably low outside of the worst of summer, when we might just reach half the bill of our one-bedroom apartment-dwelling peers. For the hour or three each night we use any artificial lighting it's a single LED bulb. Laundry is strategically batched in cold water, then hangs outside to dry; I've done a bit more handwashing. Showers are based on need rather than a schedule. Using ordinary soaps instead of body wash & shampoo detergents means less oily skin & less funk. I'm debating whether to make this the year we install solar.

Since we were already driving the absolute minimum to commute using a very efficient small car, the price at the pump is only a tiny monthly change, which we could easily erase by dropping our only streaming entertainment subscription as we're considering; we have a large backlog of last generation's video games nicked on sale, the library offers video streaming as well as ebooks for lazy entertainment, plus the longer daylight makes for more outdoor options going toward summer.

If I'm worried about the rising cost of anything it's healthcare, so that's not really been a change.

Arbitrage

  • Handlebar Stache
  • *****
  • Posts: 1405
Re: How Are YOU Successfully Beating Inflation?
« Reply #46 on: April 25, 2022, 01:17:22 PM »
Not really beating it, just living through it.  Raise was average for the company, under 3%, so not much help there (and we took a voluntary 50% pay cut last year to go coast-FIRE).  Expenses still well under income, though.  We generally live a pretty low-expense lifestyle, so we haven't made many changes in response to inflation. 

Grocery cost increases, and those of various household products are definitely noticeable, and stinging a bit.  Only one car, and we don't drive much, so little effect from that.  We do have a house with a large, fixed-rate mortgage under 3%. 

From the investment standpoint, I've had I bonds and TIPS as inflation hedging on the fixed income side for a while, so those have been paying off.  I did purchase some extra I bonds over the past 6 months with the attractive rates. 

afox

  • Pencil Stache
  • ****
  • Posts: 571
Re: How Are YOU Successfully Beating Inflation?
« Reply #47 on: April 25, 2022, 01:39:47 PM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.


Real FINANCIAL INDEPENDENCE requires that you are capable of handling quite a bit of variability with respect to market conditions, unexpected expenses, and INFLATION.

If your probable-case financial model shows you can spend $Y per year and you are doing everything you want at Y * .7, for example, you’re FI.

But if you’re going to have to cut back on stuff that are part of your basic spend and get nervous about a few years of high inflation you’re not really FI.

You are stating the obvious, I Agree 100%.

My point was that a 10% increase in expenses due to inflation is real money and has an impact regardless of whether that 10% is $100, or $100,000 especially for people who are living off of their savings.

Inflation is weird and the price increases trickle down to just about everything in unexpected ways. Increased transportation costs dont only affect those who drive. Principal and interest may make up the majority of a recently purchased home but in the later years of home ownership taxes, insurance, and maintence will cost more than the fixed costs in current dollars. I dont have the time and energy to track prices of specific foods. The best way to measure how inflation is affecting you is probably to compare one years spending to another years. I am sure that mentally noting the price of eggs and milk is not going to give someone an accurate picture of how inflation is affecting them.
« Last Edit: April 25, 2022, 02:12:01 PM by afox »

HPstache

  • Magnum Stache
  • ******
  • Posts: 2859
  • Age: 37
Re: How Are YOU Successfully Beating Inflation?
« Reply #48 on: April 25, 2022, 02:21:51 PM »
I didn't really feel it at the grocery store (we mostly shop at Costco) either until I checked current prices vs a spreadsheet I had been keeping up of the prices about a year ago.  Most SKU's had gone up by well over 10% since then.  Our 3 boys are growing super fast and eating exponentially more food so I had just chalked up leaving costco with a $500 bill instead of a $400 bill most times as we were just buying more food... which probably explains only half of the story :).

bmjohnson35

  • Pencil Stache
  • ****
  • Posts: 668
Re: How Are YOU Successfully Beating Inflation?
« Reply #49 on: April 25, 2022, 03:18:53 PM »
Some people are stating that basically having low expenses to begin with as a way to "beat inflation" however inflation is a relative increase in price and whether you spend $1 or $1000 the relative increase is the same percentage wise. Since the long-standing basic formula for FIRE is based on low expenses reducing the amount needed to live in perpetuity and saving enough to pay those low expenses forever inflation does have an impact on savings and perhaps even the success of a FIRE plan regardless of whether one spends 10k per year or one spends 100k per year.


Real FINANCIAL INDEPENDENCE requires that you are capable of handling quite a bit of variability with respect to market conditions, unexpected expenses, and INFLATION.

If your probable-case financial model shows you can spend $Y per year and you are doing everything you want at Y * .7, for example, you’re FI.

But if you’re going to have to cut back on stuff that are part of your basic spend and get nervous about a few years of high inflation you’re not really FI.

Agreed Ron.  My previous comment about 10% increase would only equate to around $4k was meant to clarify how little impact  it would be.  We actually draw less than 1.5% of our liquid assets annually and a good portion of that is dividends.  We do this by choice, not necessity.  We tend to be frugal by nature and may even make minor adjustments naturally, but we live very comfortably.  For example, when I read that the average new car costs $45k+ these days, it blows my mind. We have never paid near that much for a vehicle.  Our last car purchased was an Avalon with 40k miles for $13k.  It's truly amazing how "rich" you can live with relatively low income.