Wow, gas prices are heading to an all-time high, and your shopping expenses have nearly doubled. Inflation is upon us, and it’s time for us to decide how to react.
What choices do you have to combat inflation? Will your job increase your wages to help you deal with inflation? Do you need to take a second job?
The simple answer is that you have to do something because it is only getting worse from here. We could be on the brink of war, and oil prices will continually rise.
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I have been covering inflation and our paychecks for over a year now. Even though I make over $100,000/year, I still realized that this money wasn’t enough to carry me to the finish line. I had to take drastic actions like start blogging and investing.
Combining the two ideals. This is the perfect time to connect my favorite topics, inflation and paychecks. Let’s look at what I have written thus far.
- Inflation is Coming
- How to Prepare for Inflation
- Inflation vs. Royalties
- Inflation vs. Dividends
- Inflation vs. Rents
- Inflation vs. Crypto
- Inflation vs. Passive Income
- Inflation vs. Passive Income 2
- I Live Paycheck to Paycheck
- I Live Paycheck to Paycheck 2
- I Live Paycheck to Paycheck 3
- I Live Paycheck to Paycheck 4
Yes, I have been covering these topics for a while now and will continue to do so. There are so many people trying to do the right thing by working hard, but it’s not going well for them.
Your job isn’t enough. The point I want to impress upon you today is that your job isn’t enough. Whether you make $30,000 or $300,000, you’ll need to do more than rely on your job to beat inflation.
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“But making a lot of money will solve all my problems!” You may think making six figures a year will solve your problem, but hyperinflation comes for us all. Here’s why.
We all have a standard of living that comes along with our paychecks. The person making $30,00 eats differently than the person making $300,000. This is how inflation affects us all.
The $30,000 person may shop at Walmart and go to restaurants once every few months—if ever. The person making $300,000 may shop at Target or Whole Foods and go out every few days.
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Either way, prices across the board are skyrocketing with no end in sight. So we have to make adjustments on the fly today.
Lifestyle Inflation. I always seem to talk about lifestyle inflation. This is the concept of increasing your lifestyle along with your paycheck.
For example, let’s say you get a $500/month raise at your job. Instead of saving or investing this money, you decide to buy a car for the price of your raise. As you continue to get raises, your lifestyle will no longer resemble how it looked a few years ago.
Even more dangerous is making purchases that you base on future raises. This is where you genuinely get into trouble, and it can lead to massive amounts of debt.
Lifestyle inflation destroys wealth creation and generational wealth. However, in America (and other countries), we continue working to buy these nice things. Inflation will teach us differently.
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Lifestyle Deflation. Let me teach you a different way. I believe in making more money to solve financial problems. However, making more money isn’t the complete answer. You still need to deflate your lifestyle in addition to making more money. Yes, “in addition to” making more money, you need to deflate your lifestyle.
My example. I have a good-paying job, my dividends increase every month, and I have a little income stream from books. However, I still deflate my lifestyle to reflect the new world order that inflation brings us.
Every month, the military directly deposits $800 to my Discover checking account attached to my favorite high yield savings account. I use this $800 to buy food, pay small bills like Netflix and Hulu, and other small creature comforts like Peanut Butter M&Ms.
Since inflation has picked up, I changed my spending habits. As soon as I receive my $800, I transfer $200 to my Voyager account (affiliate link) and buy $200 in USDC stable coin.
This method leaves me only $600/month for all my food and bills. Yes, this forces me to make better decisions. Last month, I had $80 left at the end of the month, so I am forcing myself to adjust.
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Meanwhile, my USDC pays me 9% every month, increasing my earned interest. I reinvest the interest and add more money every month.
Your situation. Inflation is going to make you uncomfortable. If you are trying to live the same life you had before March 2020, you will be left behind. I still see people going on expensive vacations, buying gas-guzzling cars, and spending money on frivolous things. Have fun with that.
How can you deflate your lifestyle? You have two options: You can have inflation adjust your lifestyle for you, or you can get ahead of it and make necessary cuts now.
The next few years will not be pretty for the standard American who tries to live it up big. If you think you “deserve” a particular lifestyle, time will show what you “deserve.” Now is the time to retreat to our homes, learn to cook, grow plants, and build income streams.
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This is only a season. Yes, eventually, inflation will normalize. However, prices won’t go down much. Prepare yourself for these new higher price tags. We wanted higher salaries, so prices have to adjust to our new wages. You didn’t think that someone else would help you get ahead, did you?
Think about ways to have fun with your family and friends. Remember all those times we used to play board games growing up? Now is the perfect time to pull those out of the closet.
Can you imagine the price of going to Disneyland nowadays? Can you really afford to pay premium prices on an optional vacation? If you can, you are way better off than me.
I am focused on building my dividend portfolio during this down market, writing and creating, and ensuring my family has the income to live a halfway decent life. I am not scared of inflation, but I respect the hell out of it!
Don’t Gamble with Retirement 3
Conclusion. I plan to keep writing about my experience with inflation over the next few months (or years). It is essential to document these difficult times. We, as Americans, got very comfortable.
We used low-interest rates, a bull market, and government stimulus to get drunk on cash flow. Now we have to pay the piper. For now, focus on what you can do to deflate your life to Pre-March 2020 levels.
Whatever your budget for food is—cut it in half. How does it look? What changes can you make at the grocery store? Extreme times call for drastic measures. And yes, these are extreme times. I’ll see you soon in the Inflation Ate My Paycheck 101 series.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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