INFLATION MYTHS
I have been hearing an amazing number of myths about the economy and inflation recently. I checked on food prices locally. Yes, they are up, but not more than 4% over what they were a year ago. It seems that “perception” is seen as more real than reality. Following are three perceptions which don’t pan out when the facts are known…we can calm our brains and make plans better.
Myth #1: Inflation is worse than ever. There is a cost of living crisis.
We recently checked in at a hotel. The clerk complained about the “cost” of everything being so high. Well, having lived this long, I had to laugh at that. Inflation has ALWAYS been a “cost” killer. There is NOTHING NEW about inflation. Of course, if you are listening to the wrong people you would think this IS something new or “out of control” and you would be mad about it.
Guess what! The “cost” of a week’s groceries grew by nearly 25% during the Biden administration and, during those years, you hardly heard a peep from the media about it. Now, under Trump the cost of groceries has grown by ~6-7% in two years and, if you listened to the media, you’d think the world was ending. 24% divided by 4 is an average of 6% per year. 7% divided by 2 is 3.5% per year. If your head has not exploded yet because I’m using actual math, you are beginning to realize that 3.5% is a ton better than 6%. No one in their right mind would vote for 6% inflation no matter who the candidates were.
There is probably not a single year in your lifetime when there wasn’t inflation. It just happens. Thank goodness that most presidential administrations do everything they can to keep it low. In some countries the inflation rate became so high that within a decade they had to cart a wheelbarrow of dollars to the store to buy ONE loaf of bread. We are not anywhere near that level.
Take a deep breath, let it out slowly while counting to 10. (For the educationally challenged, you start with 1 and end up at 10. There is a high school in California where 94% of graduating seniors failed the senior math course.) Inflation is actually better now than it was for the 4 years under Biden (that’s true no matter which party you subscribe to).
Myth #2: You don’t have to worry about inflation once you retire.
Whoa! Nelly!
It matters no matter what age you are. It is important to remember that inflation doesn’t retire when you do. If you retire at age 65, by age 75 it is likely that everything will cost a third more. That $8 Mcburger will be $10.65. Your $100 electric bill will be $133. Most significant to this equation is that your income will NOT increase by as much as the starting wage of a Mcburger worker will. You will get small increases in Social Security, but most of that will go toward Medicare Part B premiums. Truth: in retirement you won’t get cost of living increases like you did when working. So, planning FOR inflation once retired is VERY IMPORTANT!
For my wife and I, it was this knowledge which pushed us to stack Benjamins during early retirement. We had “X” amount of income, but we spent “X minus 10%.” The 10% went into savings. If we spent all of our income we wouldn’t have had any “bounce” when something like Biden’s inflation happened. Things do happen. Cars wear out. The sewer CAN back up. Where is THAT money coming from?
The average male, age 65, will live beyond age 81. Better have a plan for those 16 years (and the 16 possible years after that because my wife’s uncle has made it to 97, so far)!!! We planned ahead because we prefer steak to dog food and coffee instead of a ½ glass of water at breakfast.
Plus, having all loans paid in full gives the retired person far more money to enjoy life even with inflation. Imagine two scenarios. Bill is married and the combined monthly income is $6,000. Neighbor Brenda also is married and has a monthly income of $6,000. Both couples feel fortunate to have a good cash flow which pays all the bills. Bill and his spouse are out of debt, but Brenda and her spouse are still paying $650 monthly on a mortgage and $850 on a car payment. Bill household has $6,000 to spend on regular things like utilities, property taxes, and trips to Colorado. Brenda’s household really only has $4,500 to spend on the same. Bill’s household is able to put $750 a month into savings ($9,000/year) while Brenda’s household is stretched to the limit. Who is in a better position to deal with inflation or a broken water heater?
Myth #3: Lifestyle changes can beat inflation.
Sure, they can…this year. But not next year. This is similar to the fallacy we have about reducing carbon in the atmosphere to stop global warming. A little change helps a lot this year, but then you need a much bigger change next year, and the year after that, and the year after that. We are now unable to change enough to make any significant difference in the amount of carbon used. 25 years ago we started with the easy stuff, like making gas cars more efficient. We reduced automobile pollutants by 30% per mile driven. More recently there was a big push to adopt e-cars. The carbon savings per mile driven only saved a paltry 8% and at great cost and inconvenience.
The same thing happens with lifestyle changes. Sure! You SHOULD make the easy changes, like buying generic butter instead of the expensive national brand. You should shop the discount grocery store for the majority of your needs. You should give up steak 5 days a week. But if you commit to making changes early on you will have made all the EASY changes and the savings you can expect with the harder changes are far less than you got the first year or two. Each subsequent change nets fewer rewards. (I will say that I still pick up loose change in the parking lot. Little or much it is FREE MONEY.) However, lifestyle changes cannot be made forever. Soon, there’s nothing left in your arsenal to fight the battle of ever-rising prices. Make the changes NOW and bank the savings.
So, in reality, once you’ve made the easy changes you’d better have a long-term plan, too. (You SHOULD make those easy changes, like cancelling the movie channel you seldom watch. The problem is that you can’t cancel it twice unless you signed up twice.)
Inflation is “coming for ya” and there is no way to avoid it. You’d better have a plan.
CONCLUSION:
The “cost of living” (which is merely another term for “inflation”) is better now than a few years ago.
Plan for inflation when you retire.
Lifestyle adjustments are only a tiny part of the long-term solution, though they are necessary.
Copyright 2026 Donald Whelpley
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