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Hope and Change: The Inflation Monster

Are you better off than you were a decade ago? In terms of real wages, I’m making about what I did when I was 26, and I’m now 40. Granted, a lot of that is self-inflicted, so I really can’t complain. I gave up salary for flexibility, and the opportunity to take risks on new and interesting things with bigger potential payout down the road. But I have to admit, as I get older, it gets harder and harder to sacrifice for¬†uncertain future rewards than when I was in my twenties.

That’s the one side of the coin. As I’ve have to be more careful about finances, the other side of the equation is undeniable: inflation. The powers that be decided that food and energy prices are too volatile, so they should not be calculated into the official rate of inflation. If you listen to those charlatans, inflation has been non-existent. But when I look at my own finances, the big things that stand out (other than the mortgage and taxes) are food and energy. I’m spending way more in those categories than I was a decade ago, as a percentage of my income.

In 2011, when I lost the high-paying job after the company went tits up, we decided to start eating more meals at home, and eat out less. Sure, it did save money overall, but my grocery bill shot way up to compensate. It was still a net savings, but the grocery bill offset more than I expected! Ordering out some pizza or cheesesteaks every once in a while, it turns out, is reasonably competitive with cooking at home.

Sure, if you can subsist on a diet of hot dogs and ramen, you can do pretty well, but if you cook meals at home as to not bore yourself, it will cost you some money. Eating on the outside of the grocery store? Yeah, that’s some shit invented by rich hippies with money to burn. I don’t find it to be cheap, even if you’re good at meal planning. I realized this summer I am mostly priced out of the beef market. I usually like to smoke a brisket at least once in the BBQ season, but not this year. Last summer we enjoyed several nights of grilled ribeye, but not this year. I haven’t had beef that wasn’t ground in some time. Fortunately, my mother taught me how to make a mean meatloaf, but I have to admit to missing steak.

How is the great recession treating you? Are you better off now than a decade ago? Is food and energy inflation pinching you? And let’s not even get into whiskey prices! It’s almost enough to turn a fella into a populist!

32 Responses to “Hope and Change: The Inflation Monster”

  1. Shawn says:

    It is really hard to do what I want to do nowadays and anything big I want to purchase I have to plan out over matter of weeks or sometimes months with careful financial planning to do it. I have a list of all the things I would like to purchase or have to pay for and most of the small stuff has actually been taken care of. The one big thing that involves a couple thousand dollars is a bit over half done but still not finished and not expected to be for quite some time. Luckily I’m not under any of time constraints. My mother is extremely bad off. two mortgages on the house and I would say almost $100,000 in debt top of the mortgages. But she refuses to file for bankruptcy. She is so horribly in the hole that I have to constantly give her money to bail her out on top of dealing with my own personal finances. She once bounced over 10 checks in one day. Guess who had to pay for that? I was planning on purchasing a sig but that went down the toilet.

    Food prices are as you said extremely high. Although I can sometimes get a steak or pork. Are usually just have breakfast then only one other solid meal a day. Of course after the great recession my area of expertise had utterly collapsed. And since I was out of it for so long no one wants to rehire me in that sector anymore. Of course I now make less than I used to; if I was still making what I was making before a lot of my financial problems would simply not exist. Or be dealt with quickly. I remember when I used to buy several hundred dollars of ammo a week. As for energy cost and has been slowly going up although we have had solar panels put in so what does alleviate the cost quite a bit.

  2. David Lawson says:

    I buy a side of beef about every 8 months at an average cost of $3.50/lb. Makes beef pretty affordable, plus I know what’s in it.

  3. overthetop says:

    My wife and I were griping about this yesterday. We love to camp and hike, but even driving an hour away could easily run us $30+ in gas. food…throw in our 3 little additional mouths to feed, and “eating out” becomes an expensive, mythical activity. And I’m fortunate enough to be in a field where incomes are still rising to some degree!

  4. Jeff O says:

    The way inflation is calculated makes it a joke, just like the new unemployment numbers. Inflation doesn’t help the weekly bottom line, but it does help those that own property when you do sell. It doesn’t help with property taxes though, so is the net/net a wash? Hmmm…

    The old adage remains true in any economy, ” the more you earn the more you spend”. Thus, inflation effects the vast majority of people in the same way. My suggestion: plant a garden. Most Americans have more than enough time to maintain a small plot, even in town. If you have a little extra land, plant some grain and build a still. Kill two birds with one stone!

  5. Nate says:

    Natural gas prices have actually been experiencing deflation in real terms for quite a few years now. Electricity is going that way too as the price of solar plummets and creates an ever-falling higher bound for the maximum price that the market will pay for electricity. Gasoline is fairly expensive, and not getting any cheaper, but most of the pain coming from that quadrant is our own bad decisions to do things like own multiple vehicles that get poor gas mileage, live far from work, and drive those low-MPG vehicles to get there.

    One of my neighbors drives a lifted F350 100 miles to work and back every day. He says it gets about 12 MPG. He’s paying like $30 a day for the privilege of just getting to and from work! That’s a heavier self-inflicted tax than the most punitive government. Replacing the monster truck with an average 35 MPG sedan would literally pay for itself in gas savings in about three years not even including the gains from the sale of the truck.

    • Renegade_Azzy says:

      I get 18-12 in mine. Buying a new vehicle is not in the budget. My commute is 9 miles. In spring-fall, the bike gets 45-50mpg, depending on how I drive it.

      • Ian Argent says:

        For a 9 mile commute, it’s probably not worth it to get a 4-season econobox over your bike. For longer commutes, run the numbers on a cheap high-efficiency car like the Yaris or Smart (see Fueleconomy.gov for appropriate calculators, note that they will give you the option to compare cost/mile; important for comparing vehicles that take different grades of gasoline, or diesel/gasoline comparisons). I’ve seen owners of low-efficiency vehicles claim that getting a Yaris or Smart saved them money immediately, because the additional car payment was cheaper than the cost of gas for say, a F250…

        • Nate says:

          Exactly. And you can always sell the F250, too.

          I think is that we need to get used to the idea that getting rid of some of our huge gas-guzzling vehicles is likely to be the lowest-hanging fruit. Vehicles are so expensive! Monthly payment, gas, insurance, registration, maintenance and repair… it practically never ends!

          • Ian Argent says:

            I own a Smart – there is no way in the wide wide world of sports I’d have it as my only car. I dunno about you, but the marginal cost of a paid-for truck is worth it for when you need something that can carry more than 2 adults and a weekend’s worth of luggage or a weekly grocery trip. (For me, that marginal cost is the registration, the additional cost for insurance is really small).

            • Nate says:

              If they’re both paid for, that combination makes a lot of sense.

              • Ian Argent says:

                The Smart starts at $13K new and mine has historically run 37 mpg combined on 93 Octane (91 specified, but it’s hard to find anything that isn’t 87/89/93). Compared to an 15-18 mpg truck, it really doesn’t take a really long commute for the gas savings to cover a car payment at that level (or even the 16K mine cost nicely loaded – that 13K doesn’t include AC, for example). The Yaris is in the same price range and, while it has a lower MPG, it makes up the per-mile difference by drinking 87 octane

              • Renegade_Azzy says:

                I havent had a car payment in 10 years. Never had a bike payment. If I cant buy that vehicle with cash, then I probably wont get it.

                And a smart? for their size and cost, the actual mpg is horrible. and they suck to drive. Ive driven my bud’s on multiple occasions. That horrible excuse for a transmission should have been left to the small work truck is was originally in.

                • Ian Argent says:

                  You know, I did some research before I bought the silly thing. It was the cheapest per-mile non-hybrid to operate (despite the premium casoline requirement), though the Yaris is close. Nothing else non-hybrid compares when comparing apples to apples. You can do the research too – fueleconomy.gov will let you compare up to 4 different vehicles, and you can plug in the numbers you like for miles driven per year and gas costs for your neck of the woods. that gives you “fair” comparisons across vehicles (allegedly the EPA tests shaft hybrids, but that’s not important for the Smart). And I’d really like to know where you’re finding a a feature-comparable compact car at the same price point, I really would (I’m looking for another commuter vehicle for my wife, who hates driving the Smart). I’ve granted the Yaris is comparably priced, which I personally hated to drive when I tried.
                  I’m not going to talk up the joys of the 1.0 version of the transmission (in fact, I hated it, and always did my own shifting); but around mid-2009 they put out a software update that made it bearable to drive. You’ve cited the reason my wife hates the thing, in fact, even with the software update.

                  As fora the no-loan-ever thing, well, Matt, below, cites why you might not want to do that – a cheap car and expensive gas means free money via reduction in gas costs. Like I said, <run the numbers. It wouldn’t make sense for me to buy the Smart and retire my 24 MPG Rogue right now, if all I was going by was reducing my gas bill.

                  • Renegade_Azzy says:

                    When I run my numbers, no amount of gas savings makes a $300+ payment work.

                    As for paying off loans, the faster I can get out of all of them, the more I can put into my savings and retirement (which because of healthcare and my boss playing fast and lose with numbers, is already in the crapper)

                    Isnt it grand that congress can wave a pen and give everyone free ____, and now life costs more? Well, unless you go stand in line for the handout.

                    Ive thought about saying screw it, apply for everything I can get, and ride it out until it crashes. Not sure I can look my daughter in the eye later in life and say I did though.

                    • Ian Argent says:

                      You’re the one with a 9 mile commute, I didn’t expect it to for you. But that is a little unusual, just as Matt’s 100 mile round trip is a little unusual (though less so than yours, IIRC). OTOH, unless you put NO money down on a new Smart, and get all the luxuries, you’re not paying that much monthly either.

                  • NUGUN says:

                    yes, but you could of bought a used Prius that would get better mileage, seat 5, and have an expected life that would exceed a new Smart.

                    Or buy a Nissan Versa which can be had for nearly the same price. Get 38mpg. Seat 5.

                    • Ian Argent says:

                      You can get a used Prius with less than 100K miles for around $16K? Has the bottom dropped out of the market that much since I last was looking?

                      The Versa has interesting numbers, both for cost and for economy. Lookinga at MSRP and EPA numbers for both vehicles, the Versa in a base model is a tad cheaper and has better highway mileage, but worse city mileage and combined mileage per the “official” numbers. It wins on a $/mile basis because the Smart drinks premium. I don’t recall either of those being the case in 2008. I like Nissan’s CVTs (assuming the CVT is similar to the one they have in the Rogue, anyway). Definitely a viable option, and it is now on the list for a second child-seat capable vehicle. Thanks

                      Please note, though, that I was using “official” specs for comparison, particualrly for fuel econoomy. The Versa S is 31/40/35 (city/highway/combined) in the 2015 model, whereas the Smart is 34/38/36 – a push (ties go to the bigger car, of course). I happen to know from my own experience that I nail right on the EPA numbers for my own driving style; if you do better or worse, you should factor both of those. The MSRP for both is right about the same per the manufacturer’s website (there’s a * next to that, since Nissan won’t give me an as-built quote on their website, preferring a quote via email so the dealer can harass me. Smart will cheerfully let me know what the MSRP is after I’ve chosen my specs).

    • Matt says:

      That math is exactly the reason I bought a new car for commuting. I have a 100 mile round-trip commute and I was driving a 14-20mpg Jeep that was paid for. When gas is at $2.80/gallon, that was the break-even point where it was as expensive to have a car payment and associated costs over driving the paid-for vehicle. Above that and I actually save money. With gas in the $3.20-$3.40/gal range now, it is cheaper for me to buy a fuel efficient car and pay for it than to drive the debt-free vehicle. Switch to a 32-35mpg Honda Fit and it works out better for me in the end.

      I’ve really started to take a short-term/long-term, good debt/bad debt approach to things. Companies take on debt for economic reasons. Sometimes it works out for individuals too.

  6. We were doing OK. Wife was working, and then got laid off. Alright, we budgeted our home purchase for that, and it was all good. Not as nice as before, but bills were paid, and remaining debts were being plowed through while she caught part time positions here and there.

    2 years later, our daughter was born. Savings took a bit of a hit with having to pay medical deductibles. Still doing OK. A bit more tight, but bills all paid, and family was helping greatly with baby stuff.

    Then the healthcare act arrived. My health insurance plan went away, as it was not compliant. Our company lost group status, because we had slimmed down so much, and a few people were more than happy to go dump their info in the .gov website and suck at the teat. The closest plan we could find to our old one now had a 3500 deductible (up from 2000). It also went from 360 a month for the three of us to 690 a month.

    More than my mortgage.

    Suffice to say, that’s when I started going hardcore on my own business, and put student loans on deferral. I commute as minimally as possible, and use the motorcycle as often as weather and cargo permits. Wife is super sale mom, and frequently does the Craigslist thing for anything “new” we might need. Im currently selling off a bunch of stuff (while working 2 jobs) to fund getting tires for both jeeps, and doing basic repairs to her’s for the winter.

    Not sure what is so “great” about this recession. Others tell me its fine, because they have no problem hitting up uncie sam for cash, and maxing out credit cards.

    So, if you want to support a small business, and are looking to customize firearms or accessories, hit me up, we laser engrave all sorts of things. http://www.azzysdesignworks.com/decals/

  7. Stacy says:

    Government statistics are getting more and more made up, the worse things get in the real world. The stat that probably matters most is how many times the official GDP and/or employment numbers go in the opposite direction of, say, corporate earnings, housing starts or durable goods orders.

    Yes, food is getting expensive. Whisky … depends :) If you can find it locally, War Horn is a very excellent whisky for a very reasonable price. If not, stop at the ABC store next time you’re in VA.

    • Renegade_Azzy says:

      Not only is food more expensive, the sizes are smaller. go find a 5lb bag of sugar…..

    • MattW says:

      The problem isn’t really that government is making up their own numbers – I don’t think that is anything new.

      The real growing problem is the growing gap between the people who listen to the garbage the government (and MSM) spout and take it for truth vs. the people who actually look at their real life cash spend and realize it costs a lot more to live with the same level of comfort than it did 10 years ago.

  8. Things are tight for most folks now. I’ve started using coupons and I know which of four stores in the area I can get any given goods the cheapest. Yesterday my heart skipped a beat when I found lamb shoulder chops on sale for $2.99/lb (regularly $6.49/lb). That will make a nice treat this week. As to whiskey, I thought about writing a blog review on the cheapest varieties that are still bottled in glass. I was going to call it “Bottom of the Barrel.” Sampling a few candidates was depressing enough that I kind of gave up on that idea.

  9. MattW says:

    I remember just about 8 years ago when I was pulling in somewhere around $50k a year fresh out of college and I thought that was pretty good. I swore to myself that in 10 years time I would more than double my salary.

    Well that has happened, but between the increased cost of housing – we rent in the DFW area because we are still trying to get rid of one of two homes in our former state -, the increased cost of food, gas, etc… I have no more disposable income than I did 8 years ago.

    I drive a 2001 Mercury Mountaineer with over 165k miles on it. It desperately needs to be replaced, or have major work done on it. I’ve always wanted a full-size pickup truck but I can’t imagine paying $30k+ for a new one, or even $15k+ for a 5 year old used one, not to mention that it would make much more sense to get something with better gas mileage.

    I also find that I can’t afford any of my hobbies anymore. Shooting? Yeah right, with range fees now $20+ and ammo still higher than it used to be that is a no go. I can barely afford to practice with my carry gun on a monthly basis.

    • Nate says:

      If you’re making $100k a year in Texas (no income taxes, whoo!) you’re doing great. Once you sell those two houses you own in the other state, that should free up an enormous amount of cashflow, and you should be able to buy a really nice Texas house, possibly even in cash after a few years of saving. That will further reduce your cashflow and you’ll really be able to enjoy that $80k or so post-tax income of yours.

  10. divemedic says:

    Ten years ago, I was making $60K a year. This year, I will make about $85K. My income has increased by 40% in the past ten years.

    Inflation has taken far more from me than I have increased.

  11. Sigivald says:

    The powers that be decided that food and energy prices are too volatile, so they should not be calculated into the official rate of inflation.

    IIRC the main reason they’re not included is that the Official Rate Of Inflation is used to work on monetary policy (how much money the Fed prints), and energy – and thus food, which requires so much energy to produce and transport that the prices are closely linked, and also suffers failures and thus price spikes for reasons completely unrelated to the economy overall – is volatile for reasons unrelated to fiscal policy.

    Thus, to prevent inflationary or deflationary policy at the Fed, and to let it meet its low-but-not-zero inflation target, they calculate it in a way that suits those ends; we hardly want the Fed clamping down on the money supply because of a second Oil Crisis, when “printing too much money” wasn’t the cause, do we?

    (Assuming, that is, that one was possible, which it ain’t because OPEC is a joke anymore, but other causes with similar effects are possible.)

    It’s not meant to be a general cost-of-living index; the problem is that the State often treats it like it is.

    (This is, of course, an argument for a reform in the very system of money, and going back to either a pre-planned fixed supply of fiat money or – God help us- back to a metallic system.

    But that’s a whole different can of difficult worms.)

  12. Archer says:

    A few years back, I took a job paying around 30% more than the last one, with better hours and better benefits (both in terms of quality and cost/deductibles).

    That move is what’s keeping our bacon out of the fire now, but honestly, I don’t expect it to last. (The job will, but the good prosperity won’t.)

    We have not increased the number of expenditures – we still have the same number of bills – but somehow, even with the 30% pay increase, we’re not any better off than five years ago. We sold one car to eliminate that monthly payment and insurance in order to cover student loans that went into repayment (student loan payments are approximately equal to the loan+insurance+gas payments on the car we sold – a net wash). I started commuting to work by bicycle. We constantly call our TV/Internet provider to get the “lower-tier” or “new customer” rates (which they’ll do in order to keep our business; the cost doubles otherwise).

    But the biggest bill increases are groceries, gasoline, and electricity – food and energy. We try to limit A/C use in the summer, and use the wood stove for heat in the winter. We plant a mid-to-large-sized garden every year, and participate in the local gleaners’ group, and freeze/dehydrate/can whatever we get.

    On paper, we have a budget surplus every month, but it’s small enough that ANY unforeseen expenses or larger-than-normal bills will consume it.

    At this point we’re hoping to hold out until the student loans are repaid, which should be quite a bit sooner than the standard 10 years (we put a sizable chunk of our tax refunds toward reducing the principle, but keep paying the same monthly amount). That’ll free up a few hundred dollars every month, but I fear that by then that “extra” will also be needed to cover the basics.

    So, no. Despite the increased income, we aren’t really any better off than 5-10 years ago.

    • Archer says:

      On a related note, why is it that when the cost of a gallon of gas goes up by a dollar, it’s a “slight price increase,” but when it goes down by a nickel, the talking heads say it’s “plummeted”?

      It’s like taxes. Pay $200 more, and it’s a “slight increase”. Pay $2 less, and it’s due to a “significant tax cut”.

      Gah!

    • Zermoid says:

      Try living on a fixed income, that the govt refuses to raise by more than a couple percent or less because there is no inflation.
      Meanwhile your food costs, fuel and electric has doubled or more!

      AND the credit cards all decided to jack up the interest rates to 25% a few years ago……..

      I almost never shoot more than a couple rounds anymore, can’t afford to replace it….

      Just going hunting costs me ~$10 or more a day now, and that’s staying localish…..

      What REALLY pisses me off is while they were refusing to give Social Security recipients a raise for cost of living increase, for several years, because they told us there was no increase in the cost of living, they gave Congress a big raise for cost of living increasing……

      GRRRRRRRRRRRRRRRRRRRRRRRRRrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr.

      • Archer says:

        Didn’t someone (Sigivald) above point out that inflation is only supposed to be a marker of fiscal and economic health, and NOT a cost-of-living index? Yet they use the “flat” inflation rate as a justification for not adjusting incomes.

        If they’re going to look at adjusting incomes based on cost-of-living changes, they should be looking at the actual cost-of-living for an apples-to-apples comparison. The “flat” inflation rate is a cop-out.

        And I also think Congressional salary changes should be done by referendum. In any other context, being able to vote in your own pay increase would be an illegal conflict of interest.

  13. NUGUN says:

    I make significantly more than I did 10 years ago. Yet, I’d say that my standard of living is not significantly different.

    = 2x$ Gas

    = 3x$ Food (My ex did most of the grocery shopping, I only did so periodically. So I’ve noted the increases. A spool of Italian sausage was $4.99-$5.99 when I moved to PA in 2006. That same spool is $11.99-$14.99. Let’s not even get into fresh produce, bell peppers often cost what steak did 10 years ago. Decent steaks are now $15/lbs.

    My grocery budget tends to suffice on D&K and Amelia’s surplus grocery outlets.

    I used to be able to buy lunch for around $5.$6-$7 if I got a beverage. Now lunches almost everywhere run you close to $8-$11.

    Then you have utilities. Electric has been stable. But phone/internet/etc. Many of us are now paying $60-$100/month for mobile phone and data plans. My home internet has sky-rocketed. When I moved to PA in 2006 it was about $36 for 6mbps internet service. I am now paying over $50 for a meager 3mbps service from Comcast. Considering the technical standard went from 3/6 to 25/50 mbps. It’s a huge rip-off, and we all know that’s because there is zero competition.

    Health insurance increases. We all know about those.

    The truth is, that in general the only difference between working class and middle class is “insurance safety net + home equity + annual vacation”. There is very little difference in lifestyle. Most of the extra cash goes toward having a more reliable newer vehicle, health insurance, life insurance, home insurance, and equity of owning a house. That is the the real difference between a $50K and $75K houshould.

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