Ep 95: How Today's Inflation Impacts Your Generation

Today we're talking about why everything cost so much more right now.

And how does one little word have so much impact on the financial decisions that we might make?

And how does this impact us from varying points in our lives?

Well, if you've gone to the grocery store, and you've seen an increase in your grocery bill, or you're trying to buy a house right now, and you're in constant battles with individuals who are showing up with offers better than yours, I get it.

I understand how all of those things play a part in how we make financial decisions, and what do all of these things really mean for us now, and in the future?

Let's talk about what inflation actually is. We'll start there on this edition of the Thrive For[e]ward podcast.

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Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Advisors' Pride, a SEC registered investment advisor. LPL Financial, Advisors' Pride, Forethought Planning and the guests of Thrive For[e]ward podcast are separate and unaffiliated parties. The views expressed here are those of the participants, and not those of Forethought Planning, Advisor's Pride, or LPL financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services.   

Transcript

Welcome to today's episode of The Thrive Forward podcast. We are excited to welcome you and we're talking about I just everything cost so much more right now. And how does one little word have so much impact on the financial decisions that we might make? And how does this impact us from varying different points that we are at in our lives? Well, if you've gone to the grocery store, and you've seen an increase in your grocery bill, or you're trying to buy a house right now, and you're in constant battles with individuals who are showing up with offers better than what you are putting your best foot forward, look, understand how all of those things play a part in how we make financial decisions, and what do all of these things really mean for us now, and in the future, if you know somebody who is spending money, oh, wait, all of us are. So share this podcast, with your friends, with your family, anyone that you know, because I think the more educated that we can become about our financial aspects of life or our wealth, and how we allow ourselves to have a healthy relationship with what it is that's happening and educate ourselves, the more worthy you start to understand that we are of wealth, and when we're ready to Thrive Forward. So let's press play. Hello, there friends. So let's let's level set a little bit here. Let's talk about what inflation actually is. I'm sure you know this, but this is like a good just like levels that refresh the all lives very busy lives. What does it mean? Well,

it means the increase in the cost of goods or production and things that we consume, right? Whether it be housing, going to the grocery store, the gas pump, buying a home, whatever that is, we are all affected by it in many different ways. And today, I want to break down for you how it impacts us now going forward, and how different generations are experiencing this differently, and maybe what you should consider and learn from each other. So let's start with what what is it that it is we are experiencing from different generations. So really, we if we consider the really four big generations right now, Boomers, Gen X, millennials, and Gen Z. Not that the silent generation, which is the generation before the boomers is truly silent. But let's think about these four generations as the largest aspects of individuals who are being impacted by inflation. At this point in time. You are a boomer, if you are age 57 to 75, you are Gen X or if you are 41, to 56. Some people might say 41, you might be a cusp of this like Gen X millennial aspect of things. It just depends on what stats you read. You are true millennial, if you're 25 to 40 years old, you are a Gen X, if you are 10, to 20 fives we're going to talk about the older end of the Gen Xers obviously not necessarily 10 year olds, but I'll touch a little bit on these things. So let's break it down from a boomers perspective, right. So I have a lot of clients who fall into this category, we've had a lot of conversations on how things are affected. Boomers are actually the demographic that are being impacted the most from the increases in the cost of health care. And that is because most of them are nearing or in retirement and health care becomes very expensive as you age, things start to not work the same way. And we need more assistance with things, we might need care at the end of our life. And that is definitely increasing in the cost. That being said, this generation can be the most concerned in comparisons of some of the other generations when it comes to inflation. And that's because they've experienced it more than anyone else. Gen X were quite young, in the 80s. Or, you know, not working necessarily to be able to understand those aspects of things. And definitely millennials and Gen X, maybe I'm sorry, you might not have even been a thought in your parents mind. So that being said, flashbacks and experiences of what we've experienced in life can give us kind of this PTSD type moment. And in the 80s. There were lots of impacts that happen when we saw rising inflation, and assess necessarily a falling economy. And we don't necessarily have those two correlations right now. And so yes, we have increased cost of goods and increased inflation, but not necessarily are we in the exact same point that we might have been in the 80s. And I think that while we can learn from what's happened in the past, we can't also say that the same things are going to happen. That already happened to us as well. I think they're good radars and good things. needs to be thinking about when it comes to inflation. Now let's talk about Gen Xers Gen Xers are solidly in their careers, they are probably earning the most money that they have in their careers. They're solid, they're starting to think about retirement a little bit, but maybe not so much that they're concerned about rising costs and lifestyle expenses in retirement, maybe not being able to do the same things that they wanted to like a boomer might be. That being said, you're likely maybe moving into your second home, Gen Xers are next to millennials are the individuals who are buying the most amount of homes and are usually in the upgrade. So you're moving to your second home, you're not in your first time homebuyers scenario anymore. And that is impacting you from housing prices, as well as household furnishings and things like that, that you would be doing that you would be needing to furnish that new house. And sometimes we think we need everything to furnish or if we buy a new house, we need new everything. So it's that element of being able to think about how is this going to impact us. And since this generation is getting closer to retirement, I encourage you to think about instead of getting that thing, are you on track to get to the places that you want to go and retire at a certain time that you want to retire. Whereas if we look at millennials, 25 to 40, some of them are in their first or second jobs, they're usually purchasing their first homes. But this generation gets a bad rap a lot of times, and let's look at it from the aspect of they've actually lived through four very crucial financial crisis in their lives. Now, not all of them were while they were adults. So unlike boomers, and maybe even some late Gen Xers,

millennials. And this is where I'm gonna get into the mindset aspect of things. Their first experience with a financial crisis was the.com, bubble, and the.com bubble in the late 90s. They saw many of their parents, maybe that lowers their retirement have to lose, maybe even lose their jobs, have to really rethink their financial aspects of things, then comes 2008, probably about 10 years later, many of them were starting to work in the workforce, if not already there, negotiating jobs trying to find a job while also having a buttload of student debt. And that means they also saw their parents panic, who are probably getting closer to retirement, again, maybe having to rebuild retirement for the second time, go back to work. Those aspects of things that happen in early childhood early adulthood, definitely impact how we make financial decisions, and they're part of our money stories, they're part of our wealth vision, if we don't rewrite them into a healthy behavior. That means that the next one was well into adulthood, which is COVID-19, two years ago, can't believe or saying two years ago already, but two years ago, we saw a definite dip in the market, especially for millennial women, this hit very hard from an aspect of having to take steps back and work or just, you know, not work at all to be able to take care of their children. Some got really creative negotiating, being able to stay at home and others weren't able to do the same. And so the fourth one is this rising inflationary environment that we're living in. And although we might not need to refer to it as a crisis, these are big opportunities to learn from a financial standpoint on what it is really impacts us from a financial standpoint. So although Millennials might get a bad rap, they are the generation that has definitely lived throughout their entire lives in a space where they might be questioning how to live from a financial standpoint, then we get to our Gen Z and Gen Z, much like the millennials, the older side of the Gen Z are starting to be curious about what is it that they want to how do they want to live? Where are they going to go to college? What is it they want to be invested in, and from a spending perspective, they're the they're the individuals are going to be impacted the most by rent increases, or even something as simple as going to a laundromat that is actually increased by 7%. So if we think about our regular day to day things, they might be different for each generation, but they impact us exponentially. So if we talk about where each generation spends the most money, millennials actually are the ones who are spending the most when it comes to housing, food and alcohol, transportation, health care, education. And then other categories, so they are the ones that are spending the most amount of money. So they're also controlling how this inflationary element occurs. So let me break that down a little bit more further for you think about it in this perspective, companies are not going to change the prices that they have on something, if they know that somebody will buy it from them, we want something so we're gonna go get it. We'll pay whatever we need to to get it. Um, so last time, we really looked at the price of something besides maybe going to the gas station, which everybody wants to complain about. But we'll be, but we don't put complain about going and sitting in the Starbucks line, or coffee joints line, and getting our $7 coffee or whatever it is. Now, I don't drink coffee. So I don't know. But that element is something that just boggles my brain, we can compete, we can complain about gas, but we don't complain about coffee. If we control if we control for the most part, supply and demand, we control the demand part of it, we don't control the supply part of it. But we get the decision of whether we're going to buy stuff, stuff that we might not even need and drive prices up. Because companies can spend that first charge that consequently,

relating it back to us. So we want to kind of put a little bit of a bandaid on the inflation standpoint, it's not just what the Federal Reserve's going to do. It's not just what companies are going to do. It's where we're going to put our money. And how are we going to start putting our money in places that maybe are saving for us? If inflation is growing, we've got to be able to pay attention to some of the things that we are doing. Let's take a pause in our conversation today around inflation. These are complex topics, concepts that sometimes feel like or taking a big bite out of a big elephant. And we're not making a difference, right? How is it that we actually make a difference? Well, each and every single one of you has a different financial life. Your wealth picture looks completely different. It's very personal to you. So how are you taking steps forward for yourself today? If these topics are complex, and you need a partner to come alongside you to help break them down and make them realistic to what is actually truly personal to you. We would be honored to take that step with you on this journey. Simply go to forethought. planning.com, backslash wealth assessment to schedule your 30 Minute complimentary session with us today. Now, back to more conversation, and nuggets of knowledge around inflation, and how it impacts you. Action Items. Are you looking at your cash flow? Let's look at how you are saving how you are investing how you're spending down? If you're a Boomer and you're in retirement. What is it that your cash flow looks like? Can you preserve that lifestyle given the increase in costs, it's important for us to be able to have those conversations. And a lot of times a really great financial partner or financial advisor or financial planner is going to ask you to have some transparency into what your expenses are. For me with my clients, we actually use a software to track all of their expenses, they load in their credit cards and their spending so that we can categorize every aspect of their lives into their expenses. And they have a clear idea of where their money is going, where it's coming from, and what they're spending on. And where are they saving. So they have a good idea of what they can actually do. That's financial planning, my friends. But if you don't have a good understanding of where your money's going, how do you expect to have a good relationship with it, then that's adjusting and having a realistic picture of what your lifestyle is, where are you at inflation isn't going to be high forever. This isn't something that just stays that way. Inflation fluctuates based on what it is that we are, you know, willing to be able to pay for things that's at the end of the day. That's what is controlling inflation? Do we mean these things? Do the people have the enough money to be able to earn the right tools and resources to supply that? Do they have the right workforce to deliver it to us, all of those things impact it? But if we're saying we want this thing and we demand to have this thing which is doing then they have the ability to price that at a higher rate, which is causing that money to go up? Right? That comes out of our pockets. So what is it that you really need to be doing? What is that lifestyle that you want to have? I'm not telling you that you have to live a lifestyle that's ramen noodles and no cable television and you're reading books. From the Library and you're living in, you know, a one, a studio apartment, you can still experience life, and you just have a greater understanding that this might be a period in time. That being said, having a good understanding of how you're invested for the long term is the next piece of things. What is your investment philosophy look like? What is your risk tolerance look like? And are you in match with that? Do you have an understanding of the rest, it's on the table. And if the market is fluctuating, like we've seen, how is your portfolio going to pace with inflation and the goals that you want to be able to achieve? Again, this is something that comes up through financial planning. So if you don't already have established your financial partners, I strongly encourage you to do that. Your financial partners being your financial planner, financial advisor, your accountant, your CPA, your estate planning attorney, so those individuals work in lockstep to PayPal, maybe not necessarily your estate planning attorney in this scenario, but having a good understanding of your taxes and your cash flow. And what you need to be doing from an expense standpoint is something that your financial advisor will definitely help you with.

And if you want to be your own financial advisor, we have an episode in January just for you to be able to think about some of the things that you should be considering if you want to do this yourself. That being said, my friends, inflation doesn't have to be a scary topic or a four letter word. It's not actually a four letter word. But if you know what I mean, it instead can be a powerful tool for us to consider what is it that we really need to be doing with our lives? Where is it that we're spending unnecessary amounts of money? How will this affect us in the future, the reality is, housing prices are probably going to continue to increase and not just because of inflation, but because of demand. Again, we have a generation that isn't quite ready to move out of their house and generations who want to either upgrade their home or move into their first home. And we just have a lack of space and opportunity from a housing perspective. So at the end of the day, if we want to be able to see some of these things increase, we need to have or not increase, but the accessibility of them increase the price go down. We need to have a realistic understanding of what it is that we want for our lives. And what are we willing to give up to be able to have that in the long term, not saying that you have to give it up for forever. But what is it that is accessible for you, in a generation, like millennials and Gen Z for in all intents and purposes, the cost of living hasn't increased that much we've been able to buy whatever it is that we've wanted to buy, our wages have increased more than the cost of living. We've had it really good for a while. And now it's time to really, really put on our grownup pants and understand that maybe we can't get everything that we want right now. But maybe we will be able to in the future. No one else is saving for your future. No one else is investing for your future. You are. And so how are you taking those steps forward to do that today with your three action items of making sure you understand your cash flow, date your money, understand how your lifestyle impacts that cash flow? And what does your investment philosophy look like? And how are you invested for the long term to be able to absorb some of these increase in cost of living? Through all of this, I want you to remember that you are worthy of wealth. So don't be afraid to take the initiative today. The views expressed here are those of the participants and not those aforethought planning advisors pide or LPL. Financial all investing involves risk including loss of principle no strategy assures success or protects against loss securities are offered through LPL Financial and member of FINRA and SIPC advisory services offered through advisors pride and SEC registered investment advisor LPL Financial Advisors pride forethought planning and the guests of the Thrive Forward podcast are separate and unaffiliated parties