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27 months. No, I’m not talking about the gestation period of a Black Alpine Salamander.
It’s been just 27 months since I responded to Jonathan’s request for new writers to come forward with their stories. In my first attempt, I talked about the unlikely path that my work life followed. From driving a beer truck for 30 years, to being the owner of a tax preparation practice, to my present situation as a full time retiree, who never ever gets a day off.
One of the things I wrote about was that our social security, along with a few tiny pensions were covering our total spending, and that I was struggling with how much money I could give to my favorite causes. One commenter/seeer who replied on the condition of anonymity, (just kidding, it was Quinn), predicted that inflation would eventually render our guaranteed income insufficient to cover all of our spending, and that we should be cautious about being overly generous.
Fast forward 27 months to today, and we are indeed out-spending SS and pension income. It’s not a worrisome amount, only requiring about a 1% distribution. One culprit is surely inflation; a simple lunch with a friend typically costs $40 to $50 bucks with a tip these days. Just a couple years ago the same lunch was about $30. Premiums for both property and casualty, and health insurance have painfully exceeded average inflation rates. There were also a few unexpected and uninsured medical expenses.
But inflation isn’t the only villain at work here, lifestyle creep has had an impact. We replaced Chrissy’s 14 year old Prius with a new Crosstrek, and have not scrutinized smaller purchases like we used too. We had a few decent vacations this year as well, and are planning a cross country road trip in May of 2026.
I knew that the grumpy old sage was a wise …… man, and that I should heed his warning. Still, I did not imagine that this would happen so soon. We can’t control every aspect of our spending, and 1% is surely a safe withdrawal rate. Still, we have to be mindful about our spending, and control what we can.
What has driven changes to your spending in the past few years?
What has driven changes in my spending in the past few years?
I’m sitting on several lots / parcels of land, both developed with utilities, which I’ve delayed building on because of the phenomenally, rapid rise in construction, labor and materials in just a few short years. I’m not sure if anyone here has development experience, but it’s high risk because the developer tends to front so much cost not knowing if there will be customers to use the land. Fortunately, for me, that’s not an issue for me now. I understand there are some areas where development costs are passed on to people like homeowners in the form of special property taxes but in my area, the developer carries those costs.
The construction price rise is incredibly sad for me because I know people would like to buy a house that’s affordable, but it’s not possible for me to build one at 2020 prices. I would build residential at zero margin for my own grown children who are all employed in medical or STEM but in my area appraisal values haven’t kept up with existing neighborhoods yet, meaning homebuyers need a very large down payment to make up the difference between an appraisal and a cost of a new build. That should balance out in time if the cost of existing homes remains high though.
Yes, my paper assets like mutual funds have also gone up in “value” measured solely against dollars though, as some commenters have noted already.
I rarely eat out these days. The cost has skyrocketed and I eat healthier at home. I only eat out when I travel or for social occasions. I think of it as a cost of maintaining friendships which is super important. I feel for the restaurant owners because I know their costs have gone up and they need to charge more to survive and I want them to survive. Inflation is out of control and I don’t see a path to controlling it. I hope the experts can find a way. Unfortunately cutting government spending, reigning in the national debt doesn’t align with the short term goals of politicians who want to get reelected.
In economics that is known as the Potent Director Fallacy, if I remember correctly. If such experts existed, surely we wouldn’t have the high inflation of the past few years in the first place, or even the gradual inflation over a longer period of time. Remember that 2% inflation per year, cuts the value of your savings in half and about 35 years.
Cutting govt spending is not the answer because the bulk of major spending is on things directly benefiting and needed by all Americans.
The real need – which nobody wants the hear or deal with – is to increase revenue. Americans are among the lowest taxed in the world- generally in the lower third of developed countries.
As in the family, our society needs to learn to pay for what we want and need. Social media is rampant with posts complaining about taxes, cutting govt and fraud and it’s all missing the point and mostly misleading or just wrong. If we had paid our bills as incurred we wouldn’t still have massive deficits.
Did you know Congress stole the SS Trust funds? NOT TRUE OF COURSE, but many people believe it and view their future on that basis.