Today on the Money Puzzle Podcast we talk about inflation. Most people have not planned for Inflation, but you should be planning for these changes every year. Inflation is a topic in so many of our minds right now. Whether it’s leaving the grocery store your wallet a lot lighter, or the constant news headline you can’t seem to avoid. Inflations can’t be avoided but you can be prepared!
Speaker 1 [00:00:01] All right. Welcome to the Money Puzzle. I am Brian Ramsey. And I’m going to tell you something. Today we’re talking about something that I bet you have not planned on. Most people have not planned for this, but you should be. It’s something you should be planning for every year. But this time in this in this conversation we’re having about inflation. Most people have a plan for it, and now it’s making them in the face.
Speaker 2 [00:00:24] Yep, absolutely. My name is, by the way. My name’s Aaron.
Speaker 1 [00:00:27] I was getting ready to introduce you. You messed up my little thing here I got going on. Anyway, that’s Aaron McAndrew. He’s one of the partners here. My name is Brian Res. I didn’t say that. Phone number 45022005210. Mr. Producer, I think putting it up there right now. By the way, we have if you want to go back and look at any of our other shows, make sure you go visit our website. I think Mr. Producer’s putting it up there. Those of you listening, it is FWB. That’s Frank, William, Paul and then the word partners dot com. And you just go to our podcast, check them out. We have everything listed there. So today we’re talking about inflation. This is obviously one of those things that a lot of people are concerned with right now because, you know, we are you know, we’re paying a lot more at the gas pump. So what we thought we do is. So as we sit around, we talk about what are one of the more common themes we see when somebody walks in the door? Right. And what most people say when they walk in the door is, man, I pay a lot when I go to the gas pump. Right. Right. And so what we thought we do is we we’re going to talk about inflation, but we’re going to talk about inflation when it comes to gasoline and how gasoline is priced and why we think there’s this disconnect. And then what you should be doing to kind of plan for this should it happen again in the future? Oh, and by the way, it will. So you got to make sure you planning for it. And by the way, if you have if you like anything we’re saying during the show, make sure that you go to the website and you can request a free meeting or you can pick up the phone and call and talk to Whitney and request a complimentary meeting where you can come in and we’ll talk about inflation and how inflation, what it would impact you and your retirement. Or you can talk about anything else you want to talk about as well. It doesn’t matter to us. So. All right, Aaron, let’s talk about let’s talk about inflation. This is bad, right?
Speaker 2 [00:02:13] I feel like we’ve been talking about inflation now for well over a year. So this is pretty it is bad. It’s absolutely bad. You know, but every we can’t do a meeting without it coming up because it it’s it really is what’s causing a lot of the problems that’s that’s in the market today and a lot of just in general not just the market but people’s pockets. So, you know what they’re what they’re paying today. So.
Speaker 1 [00:02:38] Yeah, let’s let’s specifically talk about let’s supposedly talk about gasoline here for a second. Okay. So maybe walk through how gasoline prices, you know, how they kind of fluctuate with the market. It’s really about crude, right? Right.
Speaker 2 [00:02:53] So, uh, the oil prices, you know, they train on futures contracts, but if you track gasoline prices, you know, back let’s go back four or five years ago or what? Not even three or four or five years ago or whatnot. People are paying dollar, 76, $2.39 or whatnot for oil or for gas. Let’s think back back in even back when COVID was happening, when nobody was driving. Right. And nobody was really out and gas prices kind of went back. And you can remember the oil went negative, right? The oil contracts went negative. And people were paying at that point at the pumps. I think at one point it got down to like the one twenties was maybe when I saw it around this area or whatnot at the pump. So it does fluctuate gasoline prices fluctuate with what crude prices are.
Speaker 1 [00:03:45] Right.
Speaker 2 [00:03:46] But crude prices right now jumped up. They’ve jumped up significantly, you know, to 120. It was almost at 130, I believe, a barrel. And then all of a sudden they flood. The gas prices jumped up instantly. So when crude prices jumped up, we had a just at the gas station right up here around the corner from us. I remember in a two day span, we went from $4.20 a gallon to 456 the first day and then went to 499 the next day. So that is a massive increase in just a short period of time. Well, crude prices go back down when they when they come back down, gasoline prices don’t come back down. So they don’t jump up. Gasoline prices don’t do gasoline prices jump up really.
Speaker 1 [00:04:36] Quick with crude.
Speaker 2 [00:04:38] But they don’t go down as quick as crude goes. So it’s different. It’s it’s difficult to really put a, you know, I guess a handle on what what the price of gasoline should really be right now. Because I remember when crude was $110 a barrel like it is right now, and we were paying less than $3 a gallon or a little over $3 a gallon for gasoline. But now we’re paying $5 a gallon for gasoline.
Speaker 1 [00:05:05] Yeah. So give us a little historical perspective, or at least how I view historical perspective when it comes to gasoline, let’s say, over the last couple of years. So the price of crude, the reason it went from 70, $80 a barrel to remember back back in February, I believe it spiked like $150 a barrel. Now, why did you do that? There’s lots of speculation on why I did it, but one of the main reasons why that crude went up was because there was this conflict over Ukraine. When Russia and Ukraine, there was a the world was essentially saying, oh, my gosh, Russia is going to shut off energy supply to the rest of the world, which disrupts energy supply. So therefore, the traders. Energy traders, okay, they ran the price of crude up. And the reason why they do that is because they want ExxonMobil, other countries, Saudi Arabia, Venezuela, they want they’re basically giving an incentive to oil producing either countries or companies to produce more at $150 a barrel than they were at $80 a barrel because they needed the supply to increase, because they really thought there was going to be this major disruption. When that happened, that’s when you saw the price of crude shoot from 70, $89 a barrel up to 150. And then if you’re if you go look at the charts, they quickly fell back down to 110. That’s that.
Speaker 2 [00:06:30] 110 one.
Speaker 1 [00:06:31] 2110 120 kind of goes up a little bit. Now, what happened was when that happened, as price shot up, remember, we were we were like $3 a gallon, but it seemed like it went straight to like 450 quit pretty quickly. Right. And then it’s it’s continued to increase. I want to ask you about that. A second was continued increase. Then when the price of crude came back down, the price of gasoline never came down. Right. And it should be somewhat correlated, right?
Speaker 2 [00:06:59] Yeah. Somewhat. Yeah.
Speaker 1 [00:06:59] Yeah. So you have to ask yourself, why in the world did we go up so high when crude. I understand why they bid up crude was because they’re trying to increase the supply in case there was a lack of supply coming out of Russia. I get that. But why? What’s the reasoning or what’s your reasoning behind why crude when crude came back down to 120. Why didn’t the price of gasoline come back down?
Speaker 2 [00:07:25] Well, I had a couple of things the last couple of times I’ve had to fill up my gas tank. I’m literally waiting in line. When I pull in to a gas station, I’m literally waiting in line at $5 a gallon. Well, I’m putting a premium in. So it was like 530 something a gallon is what it was. So. So it’s 530 something a gallon when I fill it up. But I’m waiting in line because there’s not a pump available for me and it takes me ten, 15 minutes just to fill up my gas tank to get back on the road. That’s happened twice now to me in the last month. So demand is still high. People are still paying at the pump. But I also do believe that if you look at the earnings, oil companies have made their have record profits right now this year. So there’s got to be some truth to the fact that oil companies are continuing to keep the the price of gasoline and or the gas companies are keeping the price of gasoline high because they’re making they’re making money. And guess what? Supply and demand with normal economics, people are paying it.
Speaker 1 [00:08:29] So yeah, absolutely. That was the point I was making was that it has a lot to do with supply and demand. Right. We’re we’re we’re recording the show. It’s the second week of June, maybe going in third week of June. And and it’s right in the middle of peak driving season. Right. So we always have an increase in gas prices, typically. Not always, but there could be some adjustment going into summer season. But you typically see that, you know, to sort of trail off, you know, August the around August or so when school gets back in. But I’d say right now it’s kind of a double whammy. The way I see it, you’ve got course, you’ve got higher demand right in the middle of driving season. You’re coming off two years of COVID where people didn’t they didn’t drive. And so, yeah, we’re all I mean, I just went to Birmingham, you guys know, I went to work this weekend. I spent 170 hours on gasoline getting to Birmingham and back. But the roads are full. I mean, every time we pull it or we pulled into a gas station right off the interstate, just what you said, jam packed. Yeah. I mean, we had to wait. We were two cars in line to get gasoline. And so that just tells you that, yes, there is a it the the price of gasoline is really twofold. Number one, it is somewhat correlated to the price of crude, right. So when crude goes up, gasoline prices have tendency to go up. I do believe that we’re seeing elevated gasoline prices because it’s more of a demand thing than anything else.
Speaker 2 [00:09:52] And also to add to that, another economic indicator really that will drive this will will allude to the fact that people are paying it is the unemployment rate. Unemployment rate remains low at a, what, 40 year.
Speaker 1 [00:10:06] Almost year.
Speaker 2 [00:10:07] Low. So that means more people are employed. Employment’s at pretty much full capacity because you think about it, how many times do you see companies out there were hiring or were still looking for employees and or new jobs are being created. So when people have jobs, they’re making income. Regardless of what the inflation is right now, they’re still paying the price because they’ve got the income coming in and they want to go on vacation. They want to get out like you were talking about with COVID. So unemployment rates low. So people have have income coming in and they’re spending the money.
Speaker 1 [00:10:38] Yeah. Yeah. So it’s a look we could go down the road into, you know, talking about specifically inflation for an hour if we really want to. What we really want to talk about was more the impact of inflation. And we picked a specific example, which is gasoline. The reason we did that is because, you know, Aaron and I were talking this morning about topics and we’re like, hey, it is what I’m hearing people talk about when they come in the door is gasoline prices. They’re worried about everything else. And that’s what we’re going to show here in a few minutes. Well, it’s actually going to air next week. Chris and I are going to talk about overall inflation and how other aspects of your life is impacted by inflation. And the question we’re going to ask is, should you believe the 8.9% that came out? And we’re saying absolutely fundamentally, no way in the world should you believe that. And we’re going to tell you reasons why that you shouldn’t believe it in the next show. But this show specifically, we’re talking about gasoline because it is it is the number one topic that people are talking about. As a matter of fact, we had a client that came in or actually a prospective client and it came in. We have we have a TV show, by the way. It comes on Saturday mornings, 1030 on the ABC affiliate here in Louisville. And we literally had somebody call in, they came in and they sat down, had a conversation with us, and we were talking about what bothers you? You know, what? What makes you I guess, Mr. Producers, tell me. Hold the mic up. I feel like I’m talking a lot anyway. But anyway, so that we were asking them like, what are your what are some of your concerns? What are some of the things you’re thinking about? And the first thing out of their mouth was gasoline. I don’t drive my car as much because I don’t like paying as much at the pump. And these people had, you know, what, five, six, $7,000 in net worth. So it wasn’t like they’re running out of money, but people are just conscious about it right there. They’re thinking about it and they’re saying, oh, my gosh, now. And one example they gave was when they came to meet us, they had a couple of errands and so they planned their trip and ran their errands according to when they were coming here. So they didn’t have to run errands and then go home like they normally would and be able to, you know, take it easy before coming out out to meet us. They literally ran the errands around the time that we had available for them to meet. So that tells you that this is something that is conscious on people’s, you know, front and center for them. And they’re thinking about it and they’re bothered by it. So we thought we do. We thought we’d do a show on it. Now what are some of the things that you can be doing? So, Aaron, I’m going to pose the question back to you. What are some of things that people could be doing? Because this is not a let me just tell you this, not the last time inflation’s going to impact, you know. Right. We’re going to have we’re going to have inflation. Inflation’s always going to be there. Are we going to have periods where we have I haven’t heard the word hyperinflation, but I’d say that we’re pretty close to it. But when you have periods where inflation is escalated temporarily or, you know, it could be some of these prices are going to be ongoing. We know that. Which. We’ll get into more next week. But what are some of the things that people can do to plan for periods like this where there’s inflation?
Speaker 2 [00:13:35] Well, one of the things is to be able to make sure that your savings of the amount of money that you’re saving is directly correlated with your paycheck. So, for example, a lot of big mistakes that I typically see when I’m working inside of retirement plans is when somebody sets up what they’re going to save in an account. This doesn’t just have to be a retirement plan. I mean, we’re talking about even just your savings or an individual brokerage account or whatnot. Money you can actually get to liquid to not just a retirement plan. But what they do is they’re they get a raise. Maybe they’re getting a 3% raise or 4% raise, but they don’t increase their savings rate to correlate directly with what their salary is. So that’s one of the mistakes that I see people do, is they get in and they go, Hey, I’m just comfortable. I get comfortable with saving, you know, X number of dollars a month and then they actually make more money. And then when they make that more money, they spend that money. Instead of putting away a portion of that extra money they’re making into some type of a savings account, whether that, you know, I’d argue that portion of that should go into immediate savings account if you need that or a, you know, a brokerage or individual account where you’re investing money that is liquid. And then a portion of that should also go towards your retirement accounts, depending on how you’re saving there. But the other thing is, is people need to look at their savings as an expense, just like you would a mortgage payment, just like you would a car payment, just like you would any of your expenses there and force yourself to pay yourself. That’s what savings is, because when that will help, when things like this happen, where prices are increased or are an outside expense or something costs a little more than what they thought it would, or something comes up, emergency comes up. They need to access some some money. If you’re doing that and you’re saving money, you’re paying yourself every single month as an expense. Factoring savings is an expense that’ll help pad your savings account or any of your other investment accounts or whatnot. So those are a couple, you know, ways that are really we work when it comes to financial planning on their cash flows. Where’s that money going to will build it in to the plan as an expense to show them, hey, you’re putting in X number of dollars into this account a month, you’re putting in X number of dollars into this account a month you’re putting it in. It’s kind of set up automatic. A lot of times we’ll have them feed one account and then we’ll direct portions of that savings to the other accounts that they need to go to, whether it’s a retirement account or brokerage or whatnot. So. So that’s that’s one of well, that’s probably a couple different ways I think that is tackled there.
Speaker 1 [00:16:12] So yeah, you did. Yeah. I ask you for one, you gave me four or five, but no. So but here’s what I would add to that. The only thing I would really add is when you do a good financial plan, you really we build into that financial plan inflation. Yep. So we just need to make sure that throughout your earning career that you are accumulating enough assets on a monthly basis to then when you retire, that that accumulation of funds is producing the income that you need from from the day you retired until the day you die. And there’s two forms of income that we always talk about, which is creating permanent predictable income and creating nonpermanent, non predictable income. And we do both of that. So we just help make sure that we create the income that you need. Again, that’s going to pay you what you need. And we adjust for inflation so we can adjust for inflation. You know, 3%, 4%, whatever number you want makes no difference to us. But on average, about 3%. We just happen to be in a period right now which is really wonky. We had no inflation for about ten years and then all of a sudden we got all of it in a matter of about six months, and so it’s punched everybody in the face. But that’s good, because here’s what here’s what I will tell you as a financial planner. And I’ve been doing this almost 20 years. Times of turmoil, which is where we are. Right. We we got a laundry list of things that’s going on the market right now. We’re specifically talking about inflation today. Here’s here’s why inflation is good. Yes, it is. Pain in the wallet, pain at the pump, pain wherever you want to look where you spend your money. However, it forces everyone to go back and look at their financial situation and say, Oh, my gosh, I have not done anything to prepare myself for retirement or I’m not I’m not determined whether my income or my assets are going to provide me the income from now until the day I die. I’m not done any of that. So our phones now are starting to ring or have been over the last couple of years is starting to ring more. We’re getting more and more prospective clients walk in the door and saying, you know what, this I’m worried about the market, I’m worried about inflation, and I’ve not done any planning. So I want to sit down and talk, right? So we’ve had lots of opportunities to sit down and show folks doing a proper financial plan will set. Im in motion to where inflation is not that big of a deal and the clients that have gone through this process in the past, they come in, we show them you’re still on track. Yes. You’re paying more at the pump. But we plan for that. And so just make sure that you are planning for that. And if you have it, like most people have it, make sure that you give us a call, come in and see us and we’ll help you get on track or stay on track, whichever the case may be. But we don’t try to tackle this by yourself. It’s no different than anything else. Right. I can I can close my seat, but I’m call a plumber to do the plumbing. I’m not going to try to do it myself. And so it’s the same way with this, you can probably do it. There’s instruments out there that you can probably do some cash flow planning, but I can promise you you’re going to you’re going to make mistakes and you’re going to get this rosy picture and you’re not playing for the for the mistakes. And then you can get down the road and go, oh, my gosh, what happened? You know, five years ago when I did this, playing online for free, it looked rosy. And all of a sudden now things don’t look so rosy. And so so that’s where we come into play is, you know, we can walk you through all those scenarios. We can look at all the bad and the good, the bad and and the inflation periods and make sure that you’re on track. So anyway, that’s it for another day. Any last thoughts from you now?
Speaker 2 [00:19:38] I think you covered pretty good. I think one thing, you know, I do a lot of coaching of coach for several years and I kind of relate this a lot to winning and losing games. You have a you have a you have a pain point. Okay. Right now everybody has a pain point. Okay. So what I would typically tell my athletes that I’m coaching is, hey, we either win or we learn from it, because if you don’t, if you lose a game or lose a match or a meet or whatever it is and you don’t learn anything from it, then what good is it? Right. So you’re going to keep probably keep doing that. So right now we all have a pain point. Okay. So it’s I’m going to relate this to financial planning now is where is your pain point? The purpose of the financial plan is for times like this, it’s easy to be a financial planner when the market’s up 26% in one year, when the bond markets up double digits in a year. It’s easy to be a financial planner there. But what people people aren’t thinking about it then when they really start thinking about it is when they have a pain point and everybody has pain points right now. So how are we going to learn from those pain points is really what we want to think about it. If you don’t have a financial plan, you definitely need to pick up the phone and give us a call.
Speaker 1 [00:20:47] Yeah, absolutely. All right. So that’s it for today. And thanks for jumping in here and doing this one. It was fun phone number for us. 5022005210. Visit our website FWB. That’s Frank, William, Paul and then the word partners dot com. You can catch us every week Whitney post the Peace of Mind Radio podcast that we do. We also have a TV show that comes on every Saturday morning, 1030 on the ABC affiliate. Make sure that if you watch that show, make sure you tune in to our website where we do post when that is, because that may be changing channels. So we’ll see how that works out. But anyway, that’s it for another week. Make sure that when you watch our content that you like and subscribe, comment, rate and review, we’d appreciate it. Whether you listen to us podcast or you watch us on YouTube, make sure that you give us a big thumbs up. Also subscribe so that you get any of our content that we send out and that’s it for another week. Next week we are talking inflation again, but we’re going to talk about overall inflation that impacts our lives more than just the price of gasoline. So make sure you tune in. And Chris Vance right there will be joining us and we’ll see you guys next week.
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