When Is It Time To Buy? – The Inflation Factor – Episode 467

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[00:00] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. Today, we’re going to be talking about when is it time to buy and then fill in the blank because we’re talking about mortgages, cars, and everything else that inflation is getting. So I’m going to start with the story. Is that work, Kim? Yes, please. So we’re doing some work on the farm. And as you know, since you own a farm as well, there’s always more work than there is time. You just do what you can do. And we had a small plumbing project. And I grabbed a coupler and on the coupler, it had the price of, it wrote down $2.49. And that was from last year. I had to go get another piece at the hardware store. Do you want to take a guess what the price is?

[00:54] Yes, it was actually $5.49. Yeah. And I thought, wow. And that’s not just the rare exception. That’s across the board. Yeah. And arguably, we’re hearing a lot of people say, what should I be buying? What assets should I be buying right now? Or should I be hanging onto cash or should I be stockpiling this? And I want to look at it from a prosperity perspective and hear from you. Well, thank you so much. Yeah. It’s interesting because we just had a similar situation. I don’t remember what it was that we were buying, but whatever it was, the clerk at the store commented. And this was like a tractor store or something. You know, it wasn’t a retail store per se. Commented on, yeah, everything is pretty much double.

[01:45] And so it gets us all out of whack because inflation affects absolutely everything. And they’re really, although there are certain things that you can do about it, there’s really not a lot that we can do about it. And I think one of the worst things that we can do is to be constantly worried about it. And so if you think about inflation, in fact, our good friend, Gary, who’s the submarine driver, I like to call him a former Navy person, he talks, he has a great analogy about inflation is like you’re in the river on an inner tube and you’re going with the river. And inflation is that it’s the river. It’s that movement, if you will. But what’s impactful is what’s going by on the land on the side, right?

[02:36] And so when we realize that we’re in the river and the river’s inflation, everything is impacting, inflation is impacting everything. I think it takes a little bit of pressure off. Oh, my gosh, I have to do something. I’ll come back to the question of what to buy, but it’s so important to focus on what we can control. And inflation is not something that we can control. And inflation is also very misquoted. And so the government, as an example, they have their own quote rate of inflation that is based on a basket of goods and services, which changes, by the way, which, you know, how you can have a scientific experiment and change the pieces of parts beyond me, but we’ll not get into that. And nevertheless, there are then other people’s inflation and each individual literally has their own inflation rate.

[03:29] Like if you’re in your 80s and you’re traveling full time and basically all your expenses are living and medical, your inflation rate could be more like triple. Whereas when you’re in your 40s and you’re buying farm implements or, you know, other things that you need to live your life. Yeah, inflation might be double, but your earning capacity is growing and you’re going to keep on working for many years. And so it’s much less impactful. So this does now bring us back to the question of when do you buy X? And it’s so tempting to really delay things because inflation is high or the real estate market is high or the stock market is high. And I think there’s a lot of good in that. Like I’ve literally spent the last year telling people don’t buy anything, don’t buy anything, don’t buy anything.

[04:21] But the fact is that not everything in our lives is an investment. Like if your family is ready to sell a house and buy a house, you’re going to get a good deal on selling it and you’re going to get a not so good deal on buying it. But the fact is that if your family is in that transition and they need to buy a house, yes, you could rent for a year and maybe that would be wise. But not everything is driven by inflation. So sometimes it makes sense to buy based on your life, not based on what inflation is. Now, if it’s purely investment dollars that we’re talking about and you can wait and you can survive having cash or cash value, which we need to talk about that in a minute, not burning a hole in your pocket, then waiting to buy might be the better thing.

[05:10] I know you’ve got some opinion on this, Spencer. Talk to us. Yeah, absolutely. So I look at it from a couple of things. One, the saying that happens a lot in the investment community, which is when the market is dropping, we can never time it perfectly. We can’t catch a falling knife. And that happens often. So we’ll see, one, there’s a lot of volatility. You know, some days I’ll look at my portfolio and it’s like, oh, wow, it’s up. Oh, wow, it’s down. And most of the time I have to sit there and say, I don’t even want to look at it, like just doesn’t matter. And the next piece is, you know, we look in at houses or cars or investment properties. And I think that takes us back to the previous thinking that you use.

[05:58] So a prosperous thinker, I think one thing is their timeline is different. A prosperous thinker has the ability to zoom out and look generationally and say, OK, we might be in a funky, weird place right now for this little blip of time, but I have the ability to jump out. And that’s what, you know, having finances in order does. You can say, I don’t need to be emotional now. And it’s that piece of saying, OK, I don’t have to I don’t have to participate. I can be fine just holding on to cash. And as you mentioned, if it’s a home or whatever it may be, if you need to move, you just do it. Well, it’s also interesting to your perspective of maybe not looking at the portfolio, because is that affecting your daily life?

[06:53] Probably not. And I find that having cash value. So separating cash from cash value is the most peace of mind oriented asset that I can own, because when I do see an opportunity, maybe a particular stock drops, maybe a piece of real estate comes on the market that I’ve been wanting for a long time or maybe some other thing triggers, then I can act on that opportunity. And while I’m waiting for the opportunity, I don’t have to feel like the money’s burning a hole in my pocket because it is doing something. I will tell a story about a friend of a friend that I’m aware of that lives pretty tight with his money, not a lot of extra, got three grand or something, decided to buy a motorcycle with it.

[07:46] He’s a single guy, because he knew in his mind that cash was not going to be valuable at all in his mind in the future. Well, he works the kind of jobs that sometimes there are no jobs. And so is cash valuable in his future? Well, actually, the very next month, he was having to really poke around and find work so that he could eat and pay his mortgage. So I was saddened for him. Maybe he’ll feel like the motorcycle is going to end up being the better thing. Maybe he’ll be able to sell it for more money than he bought it. I don’t know. I mean, who knows? But in his situation, he was so antsy to, quote, get rid of cash because he felt like cash wasn’t going to be valuable that he bought this motorcycle and then literally was struggling with where to find food and mortgage money the next month.

[08:44] And I think that’s one of the helpful things that cash value of life insurance can do for us is it lengthens that time a little bit. It causes us to not feel like we’re doing nothing, because cash value will actually beat inflation. Cash value grows without tax. Cash value is liquid. Cash value is a very valuable asset that we can use for emergencies and opportunities, thereby not feeling the chomping at the bit. Oh, my gosh, I have to buy something now because my cash may not be as valuable anymore. Yeah, well said. I think right now is the time to get that cash value, to start doing those things. And then for whatever else will happen, meaning we’ve seen interest rates on mortgages jump up several percent in a short period of time.

[09:36] We’re now starting to see the real estate market pop in certain areas. We’re starting to see cars become available. But then at the same time, we’re seeing other commodities jump in price. None of us know, but we do know that there is a vehicle that we can put money in that is going to be guaranteed and it’s going to be guaranteed for those that are going to be receiving it on the tail end. And that’s something that we can focus on right now. Yes. So that growth of cash value guaranteed, but the death benefit, which is what you’re speaking of, guaranteed. And it’s so easy to just forget that. And I want to address your mortgage commentary as well. Well, I just helped a client close and they rolled as they were going through the closing process from 5.9 something to 6.1, whatever.

[10:29] And they were all bummed about it. And I helped them see the perspective of first of all is like less than $100 a month. Like, I get it. Yes, it would have been nice if you’d gotten 5.9, but 6.1 is going to be just fine. And I shared with them something that I have used for over 30 years in helping people with their personal finances. For mortgages, anything at 8 or below is actually a pretty decent rate. We got really spoiled for many years hearing about these 3 and 4% mortgages. And yes, they’re awesome. But if you have a mortgage that’s below 8, you can be really grateful that you don’t have a mortgage that’s 18. Or I think I even was aware in some of the era in, you know, 20 years ago, 25 years ago of people possibly signing mortgages at even over 20.

[11:18] So it is so important to have perspective when you’re speaking about all of these financial things. Yes, absolutely. So I think, you know, when is it time to buy is answered by perspective of what you just said. If you’re feeling pressed or you’re emotionally hyped up at the moment, do whatever it takes to get that perspective. And if you are feeling certain about what you’re doing, well, then move forward. If you do have specific questions, I know, Kim, you’re not a mortgage broker or anything like that. But what you do is you do have that perspective. Send an email to hello at ProsperityThinkers.com. And whatever those questions are, I’ve yet to see you be stumped. You are so resourceful. So send any of those questions in.

[12:12] We’ll put that email address inside of the notes of this episode. So thanks for sharing, Kim. Thank you for listening to the Prosperity podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.