A DIY Lesson Learned

Earlier this week, while performing some annual maintenance on my hot water heater in my home, I noticed that water kept dripping from the pressure relief valve after I had tested it. I played with the valves some, looked for ideas on the internet (tap them a few times), I tapped them a few times, then I went about my day hoping that when I checked back later, the drip would have stopped.

The next morning, my wife went outside to retrieve something from her car and came back in with a question. “Have you seen all the water in the driveway,” she asked?

How Much? The Impact of Inflation

How much did your first car cost? What did you pay for your last one?

The erosion of the real purchasing power of wealth is increasingly a topic of conversation I’m having with clients, family, and friends. Whether the discussions have centered on why holding too much cash may be a money losing proposition, or why taking risks can build wealth over time, the central them has been inflation.

Even though estimates for future inflation over the next decade are relatively low, a little over 2%[i], anecdotal evidence of rising prices are everywhere.

House prices rose 6.9% from the first quarter of 2017 to the first quarter of 2018.[ii]

Industrial metals are up about 40% since the 2016 election.[iii]

Wood prices have risen 66% over the past year.[iv]

When the prices of goods and services increase over time, we can buy fewer of them with every dollar we have saved.

Inflation is an important element of investing. In many cases, the reason for saving today is to support future spending. Therefore, keeping pace with inflation is a crucial goal for many investors. To help understand inflation’s impact on purchasing power, consider the following illustration of the effects of inflation over time. In 1916, nine cents would buy a quart of milk. Fifty years later, nine cents would only buy a small glass of milk. And more than 100 years later, nine cents would only buy about seven tablespoons of milk. How can you potentially prevent this loss of purchasing power from inflation over time?

Could Your Plan Use More FOMO?

Did you hear about the Camillus, NY man that sued his parents when they offered him $1,100 to move out of their house? The story of a 30-year-old deadbeat refusing to leave his parents’ home where he lives rent free fits perfectly into the stereotype of a lazy, self-centered Millennial (those born between 1980 – 1992) that my Generation X (1965 – 1979) takes delight in ridiculing.

That stereotype was fed further this week when the financial information website, MarketWatch, tweeted a link to an article offering Millennials retirement advice. On cue, Thirtysomethings replied to the tweet with characteristic cynicism and snark.