World financial markets seem crazy, what does all this mean?

[goindeep]

Hey all,
New mustachian here.
Seems we are in crazy times, I am reading about banks being way over-leveraged, of course we have inflation and interest rates rising.
I am in Australia and I am paying $200 more on my mortgage fortnightly (now fixed for 2 years) and just the general price of food and fuel has gone higher on a lot of items.
What gives?
What are some practical things to do but also, assuming the worst case scenario and there is a situation like 2008 or worse, what happens then to the mustachian strategy?

[beee]

Well, mustachians will save less money each month but every dollar will buy more shares.

[Paper Chaser]

Hey all,
New mustachian here.
Seems we are in crazy times, I am reading about banks being way over-leveraged, of course we have inflation and interest rates rising.
I am in Australia and I am paying $200 more on my mortgage fortnightly (now fixed for 2 years) and just the general price of food and fuel has gone higher on a lot of items.
What gives?
What are some practical things to do but also, assuming the worst case scenario and there is a situation like 2008 or worse, what happens then to the mustachian strategy?

The Mustachian Strategy shines in downturns. The whole idea is to consume less and invest as much as you can into low fee index funds (or whatever your personal investment plan says).

During a downturn, this strategy works as a buffer for MMMers because inflation scales with consumption, and investing in assets during a downturn when they're typically cheaper gets you more of that asset for a given amount of money which benefits during any recovery that might occur.

[Freedomin5]

There’s so much you can do to reduce expenses. Here are some of the things we do. Yes, I realize one size does not fit all, but it may help get creative juices flowing in terms of how to reduce your own expenses, and therefore reduce the impact of inflation on your finances.

1. Walk or bike to work, thereby bringing daily transportation costs down to $0.
2. Cook at home. Batch cook and freeze portions for easy dinners during the week.
3. Eat out less.
4. Bring lunch to work/school.
5. Eat cheaper foods, like replacing meat with beans a few times a week. Use dry beans instead of canned beans.
6. Intermittent fasting or one meal a day.
7. Find a cheap phone plan.
8. Househack. Our employer gives us free housing. Others househack by getting a roommate.
9. Barter and trade. I make hummus sometimes which I give to friends. One friend makes me fresh bread in return. Another friend gave me a bunch of work clothes.

This list is by no means exhaustive, and others on the forum have really great ideas as well.

To be honest, we haven’t really felt the impact of inflation on our daily budget. Yes, some groceries are a bit more expensive, but we shop sales and stack coupons, and overall, we’ve been able to stay within our monthly budget.

And as another poster mentioned, we sock as much money away into investments as possible. Prices are low right now — it’s a great time to buy!

[dividendman]

Hey all,
New mustachian here.
Seems we are in crazy times, I am reading about banks being way over-leveraged, of course we have inflation and interest rates rising.
I am in Australia and I am paying $200 more on my mortgage fortnightly (now fixed for 2 years) and just the general price of food and fuel has gone higher on a lot of items.
What gives?
What are some practical things to do but also, assuming the worst case scenario and there is a situation like 2008 or worse, what happens then to the mustachian strategy?

There has literally never been a time in history where people say "We're living in calm and normal times." Welcome to life, enjoy the ride.

[Malossi792]

Hey all,
New mustachian here.
Seems we are in crazy times, I am reading about banks being way over-leveraged, of course we have inflation and interest rates rising.
I am in Australia and I am paying $200 more on my mortgage fortnightly (now fixed for 2 years) and just the general price of food and fuel has gone higher on a lot of items.
What gives?
What are some practical things to do but also, assuming the worst case scenario and there is a situation like 2008 or worse, what happens then to the mustachian strategy?

There has literally never been a time in history where people say "We're living in calm and normal times." Welcome to life, enjoy the ride.

+1
Also, frugality really shines when the tide goes out:
Those who were swimming naked are already running around like their hair caught fire; someone spending 40% of their income will spend 48% after 20% inflation, assuming no raise. I mean that's 'unfortunate' at worst. Still can be on the good side of a foreclosure 'deal'.

[ATtiny85]

As mentioned, it doesn't mean a lot to people who have been at this road for a number of years. I have a few more years of accumulation and I suspect 2022 (and maybe '23, maybe even '24, but hopefully that's it) is going to have a special place in my happy memories in 30 years. Dot-com and the GFC happened when our household was investing maybe $1200 and $2500 per month respectively. We are now pumping a whole lot more in per month. Getting some discounts will look pretty nice down the road.

Now, for those just starting I can see this being a little unsettling. But all I can say is, establish a plan and stick to it. Up, down, sideways, whatever. Whatever I pay for shares of VTSAX tomorrow (normal monthly purchase in taxable) is going to be at a lot higher price than the first shares I bought many years ago. And I have no doubt that I will get them a price that will be much lower then the final set I buy in a few years.

View all (well most) of the responses as an attempt by us to help keep you calm. A lot of folks have been through a lot of cycles like this.

[JupiterGreen]

As mentioned, it doesn't mean a lot to people who have been at this road for a number of years. I have a few more years of accumulation and I suspect 2022 (and maybe '23, maybe even '24, but hopefully that's it) is going to have a special place in my happy memories in 30 years. Dot-com and the GFC happened when our household was investing maybe $1200 and $2500 per month respectively. We are now pumping a whole lot more in per month. Getting some discounts will look pretty nice down the road.

Now, for those just starting I can see this being a little unsettling. But all I can say is, establish a plan and stick to it. Up, down, sideways, whatever. Whatever I pay for shares of VTSAX tomorrow (normal monthly purchase in taxable) is going to be at a lot higher price than the first shares I bought many years ago. And I have no doubt that I will get them a price that will be much lower then the final set I buy in a few years.

View all (well most) of the responses as an attempt by us to help keep you calm. A lot of folks have been through a lot of cycles like this.

Thank you for your insight and the reminder to stay steady. I always appreciate reading personal experiences.

[Freedomin5]

One aspect of the Mustachian strategy is to save a large chunk of your income. Say you’re saving 50% of your income. If inflation occurs and you’re now only saving 40% of your income and spending the rest, it’s really no big deal.

If you lose your job because of a recession, it’s still no big deal because you have an emergency fund and cash cushion large enough to tide you over.

The Mustachian strategy works well during down times, and even better during good economic times.

[goindeep]

Thanks all.
Let's see what happens.