Deep Dive on Inflation and FI Planning
After listening to Episode 471 where Cody Garrett and I discussed FI and inflation, my friend Jesse Cramer wrote to me and Cody and said:
“As you chatted about applying inflation in FIRE/retirement, I thought to myself, “Could visuals help here?” …and I started to visualize a little analogy and visual aid to go along with it.
Essentially, we can either apply math in “The True World” OR we can build a little math-y construct with no inflation (“The Convenient World”) and do our math there.
That sprouted into a longer-than-expected article. It’s a nuanced topic, especially when combining it with the 4% rule.”
The article that came out of that brainstorming session was ‘Accounting for Inflation in Retirement and FIRE Planning’ and since I know this is a topic that is both important and baffling to many of us, I wanted to include it here in the FI Weekly so you can dive deep and gain a better understanding.
Brainstorming Prompts for Better Ideas
I love things that help you look at a problem differently. Or, as Charlie Munger would quote, “Invert, always invert.”
This article called, “Extreme brainstorming questions to trigger new, better ideas” is a great example, and even though it’s more business related, I think it’s worth your while regardless.
Two (of many) that jumped out to me:
· No meetings: What if you had to on-board new employees without meetings? What if you had to make decisions without meetings—the process as well as the result of that decision?
· Philanthropist: What if our only goal were to create the most good in the world, personally for our customers?
Profound Quote on Assuming Good Intentions
“When working with people, assume good intentions.
When listening to people, interpret their words in a generous way.
You will occasionally get burned and mistreated by always assuming the best in others, but it is a far better way to live than the opposite.”
– James Clear, author of Atomic Habits
ChooseFI Community Taking Action This Week
“A small 1%!
I’ve been head down paying off my debt slowly, so for the longest time, I’ve said no to investing because I felt like I had to pay off my debt first. Well, it turns out that I always find a way to spend an extra $100-200/month on things/food I don’t need. So, I decided that as of today, I’ll be investing $200 into my Roth IRA monthly. It’s not a lot, but I know when I’m done paying my debt, it’ll be so nice to see the accumulated amount! ”
– Evelyn
“My 1% better was finally getting my partner on board with increasing savings! I have been maxing out my 401k, Roth IRA, and HSA for a couple years, and tried EVERYTHING to get him on board! Surprisingly what finally worked was putting his checking, 401k, and savings accounts into my budgeting spreadsheet.
Every month I plan to put our account balances into this spreadsheet, and him seeing that he made $2k in this past month while I made $15k interest FINALLY opened his eyes to compounding interest!
He opened a Roth IRA, set it up to auto deduct every month (so he will reach 7k this year), and we doubled his measly 8% 401k contributions to 16%. It’s gonna be a good year!”
– Joe
“My 1% better was getting a great deal on a trip to London using rewards points. First I booked a one way ticket from Atlanta to Tampa on Delta for 9,000 points and $5.60, then a one way ticket to London on Virgin for 12,500 points and $153. I then used Hyatt points to book a 5 star hotel in London for only 17,000 points per night.
Now for the best part, I booked a one way ticket from London to Atlanta on Virgin “Upper class” for 38,000 points and $700, because I have a friend travelling with me on the outbound flight and staying with me, we agreed that he would just pay me half of what everything cost me in points so he is still getting a great deal over what it would have normally cost him and the money is enough to cover all my taxes and fees for the upper class flight!”
– Jack
“This is probably more of a thank you than anything else…but I stumbled on ChooseFI in 2020 when working from home, and it instantly became a must listen. After listening to a podcast on HSAs, I was inspired to switch from a traditional healthcare plan to a HSA at my company’s next enrollment, and committed to maxing out. I’ve been fortunate and have been fairly healthy, so I haven’t had to tap into it for care and it’s grown significantly.
But last month I spent 5 days in the hospital with a gnarly case of pneumonia (I’m almost fully recovered at this point). I was able to put all of my energy and focus into my health and getting better rather than stressing over the cost of the ER and hospital stay because I knew that the amount in my HSA would easily cover my deductible and out of pocket max. If not for ChooseFI, I likely would not have understood the full benefits of an HSA and made the switch. And who knows what kind of bills I’d be stuck with paying? So, thank you to you and the ChooseFI team–keep up the great work.”
– Jayd
“My 1% better this week is offering an informational meeting to help my fellow teachers better understand their retirement accounts – 403b and 457b. These accounts are not well understood, and there are some bad actors in the space, so helping educate my fellow educators is a great feeling!”
– Eric
“My 1% better this week was setting more ambitious goals for February. I am working on building a niche site/blog/whatever you want to call these, but I’ve struggled to post more than once per week.
I don’t think it’s a time management problem, but rather Parkinson’s Law – I expect a post to take 2 days, so it ends up taking 2 days. Since I capped writing time at 1 day, I’ve been able to double the output, with the same input. It’s too early to tell if it’s going to work, so I’ll keep my fingers crossed. ”
– Domenico
