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Checking In: How Are Fellow DA Members Doing During This Inflationary Time?

kcfield
  |     |   188 posts since 2012

As a longtime DA member, I have appreciated hearing the various perspectives from fellow readers on the Fed, economy, inflation, savings; and have perhaps learned the most from those with perspectives different than my own. Today, I'd like to invite my fellow readers to share how they are doing, and what strategies they have used to survive this high inflationary time. Here are three things I wonder about in particular:

1) To what extent has this extended time of high inflation impacted you and your family?

2) What budgeting strategies have you used to mitigate the personal impact of high inflation?

3) While savings and CD interest rates are up significantly; they are still considerably lower than the rate of inflation, which creates a gap in real purchasing power. What savings and investment strategies are you using to help bridge this gap?

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jamesstewart
  |     |   64 posts since 2011
We retired 24 years ago on mostly CD, treasury bond and Ibond income (early retirees). My spouse and I have always been frugal and kept expenses below investment income by always monitoring cash flow, not taking out loans or mortgage, and paying off credit cards each month.

This economy has been great for us. Our income has doubled and will still go up as we lock into new CD ladders. Meanwhile, expenses are up, but net cashflow has given us a lot more disposable income vs the last 15 years of low interest income. For example, if my income was $35,000 and expenses $30,000, it would now have changed to $70,000 income and $33,000 expenses (10% inflation). It will take a long time for inflation catch up to the increase in income. I do not wish to go back to ZIRP.
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kcfield
  |     |   188 posts since 2012
James: Thanks for the good report, It sounds like your financial planning in younger years prepared you and your spouse well for challenging times like these.
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CDsuckers
  |     |   70 posts since 2022
1) To what extent has this extended time of high inflation impacted you and your family?

Other than the hidden effect of lost purchasing power, not much. But that loss of purchasing power is real. For example, I had a clogged drain on my A/C condensate overflow pan that cause it to well, overflow. I had a guy come-out to fix it. Since the HVAC is old, I asked him for a quote on replacing the whole system. It was 35% higher this year than it was last year. So, I put that home repair/improvement project on the back burner. It's not that I can't afford it. It's just that I don't like being gouged.

2) What budgeting strategies have you used to mitigate the personal impact of high inflation?

When inflation hit, we had already cut back on our two major discretionary expenses. COVID changed our budget in two major ways. First off, we haven't gone on vacation for 2 years now. We also stopped going out to eat (and didn't replace that with take-out). Since I grew-up in Chicago and now live in Southern California, everyday is sort of a vacation. Heck, it's not even Thanskgiving and it's already snowing back there!

3) While savings and CD interest rates are up significantly; they are still considerably lower than the rate of inflation, which creates a gap in real purchasing power. What savings and investment strategies are you using to help bridge this gap?

I've always held both iBonds and TIPS as an inflation hedge. This year motivated me to purchase more TIPS that I normally would.
As my CD's have matured I've been buying TIPS at auction and on the secondary market. Right now, the yields on TIPS are north of 1% over inflation as measured by the CPI-U. That's better than the negative real yields of CD's. TIPS guarantee preservation of principal in both inflationary and deflationary environments (if you purchase them with an inflation adjusted price below par).
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kcfield
  |     |   188 posts since 2012
CDSuckers: Thank you for sharing your detailed and encouraging report. It is good to hear from both you and James S the amount of wise planning that you each did during easier times, to prepare for rougher times like these.
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Choice
  |     |   937 posts since 2020
Staying high and dry…inflation is noticeable (yes, that is the word) but management of expenses is key but, as noted by others, the resultant interest income increase more than offsets higher costs!  Especially helpful is reaping the higher interest in an tax shelter, i.e. do not have to recognize as income the interest until we want to!  Ibonds!  We control our tax rate!
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sams1985
  |     |   781 posts since 2022
I've always lived below my means and it' is a strategy that has really worked out well in life and is finally starting to pay off. Inflation hurts but it's much easier to manage when you have some savings to fall back on. 
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