Inflation raises the stakes

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The financial story of the past six months has certainly been inflation.  After many decades of unprecedentedly tame inflation, starting this April inflation shot up and is now at over 6%.  Four years ago I even made a pronouncement that “Inflation was dead”.  How could I have been so wrong?  Or was I?

To put things in perspective, let’s go back to 1992, after the US had “recovered” from the first Iraq war under the first President Bush.  From then to last year, 1992 to 2020, 28 years, a generation, a lifetime in the investing world, inflation averaged 2.4%.  Over those 28 years there were just six years where inflation was higher than 3%.  Frankly, I think we got a bit spoiled.

How will this affect my investments?

But really, who cares about inflation, per se?  What we really care about is how it impacts our investments and our retirement plans.  When it’s all said and done inflation isn’t all that bad if your investments grow faster than inflation. 

This year, inflation is at about 6%, but the stock market is up about 20-25% (depending on the day you look—wow it’s been a crazy market the last few days).  That means the real return (stock return minus inflation), how much more “stuff” you can actually buy, is up about 15-20%.  That’s an amazingly good year that investors will always take.

Typically when inflation is high that’s bad for the economy.  There’s a lot of deep water there and economists much smarter than I are debating that all the time.  But the chart below shows over long periods of time it’s not that simple.

Stock returnInflationReal return

The 1970s had the highest inflation, and that was a terrible time for the economy and therefore for stocks.  But the 2000s were also a horrible time for stocks even though inflation was very low. 

Inflation makes your portfolio riskier

As someone investing for their future, the problem with inflation is that it forces you into stocks.  Stocks are a natural hedge against inflation because you don’t own pieces of paper with green ink (cash), or the promise to get pieces of paper with green ink in the future (bonds). 

Rather you own “stuff”—real estate, buildings, patents, factories, etc.  As the price of things go up, the very definition of inflation, the prices of those things you own also goes up.

But we know that stocks are much more volatile than bonds.  That’s the rub.  That’s what makes high inflation hard for investors. 

It creates this precarious balance between hedging against inflation and having the proper asset allocation.  It’s like you’re driving on a mountain road but now instead of the cliff just being on one side, it’s on both sides.

What to do?

The jury is still out on this, but things look precarious.  I always tend to be more aggressive with asset allocation, so I’m 100% in on stocks, and that’s how I’ll keep it.  But we’re in our mid 40s so we still have decades to ride out any nasty storms.  If I was in my 60s it would be a much tougher decision.

Kids investing in stocks–Part 2

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Last week I told you how I try to instill strong financial habits in my two cubs.  Obviously this is a sensitive issue because, sadly in my opinion, openly discussing money, especially with the little ones, is a bit taboo in our society.

That said, I think, early and open discussions on money are important.  As you know, financial literacy rates in our country are abysmal.  I truly believe that “early intervention” is tremendously helpful here.

Once you teach your cubs about earning and saving money, I think then the next thing is to teach them how to invest.


I am a super nerd when it comes to investing and personal finance (as you’ve probably figured out based on this blog).  So I am more than happy to dive in to deep topics like tax optimization and asset allocation.  But I can think of no quicker way to get the cubs’ eyes to glaze over and lose all interest.

For me, the hook to get them interested about investing is to sell it as a way to “get rich”.  Most cubs like the idea of being rich, so this fits nicely.  While keeping things age appropriate, I do tell them that our family’s net worth was a lot of hard work and savings, but then it grew several times that size because we invested it.  Putting it that way seemed to pique their interests.

As far as telling them what stocks are, I try to keep it as simple as possible.  A share of stock gives to a part of the company—if the company does well the stock goes up, and if it does poorly the stock goes down.  That’s it.  I don’t talk about bonds or dividends or anything else. 

Buying actual stocks

Once I got the cubs excited about stocks, I opened up two brokerage accounts with Vanguard.  First, all our family’s money is with Vanguard so that was the natural place to start.  Second, and this is important, Vanguard offers free stock trades.  As you’ll see in a second, frequent trades are important to keep the kids excited and engaged, so it’s nice that you don’t have to pay $15 each time you go in and out.

Since my cubs are minors, the account is actually in my name (to set it up for a kid is a monumental hassle).  Once they were opened, I funded each with $1000.  And we were ready to go.

I asked the cubs the simple question, “What stock would you like to buy?”  They wondered what their options were, and that’s where it became really cool—all sorts of companies have stocks.  We walked around the house looking at stuff we have that they like, and most of those were made by companies with stocks.

Mini Fox’s first investment was in Duke Energy since they’re our electric company, and ‘Lil Fox’s first was Edwards Lifesciences since I had done some consulting work there.  I bought $1000 worth of each stock and they were stockowners.

I tried to follow up by having them fill out a worksheet on each company so they could learn about it—the name, the headquarters location, what they make, how much revenue they get each year.  This worked at first, especially because we started in the summer, and they needed stuff to do, but I got lazy and they stopped doing it.  But I definitely think something like this is a good idea.

After a couple weeks I would ask them what the next stock they wanted was.  Obviously, in the real world I would never invest like this—individual stocks and very short time horizons.  But this really isn’t investing as much as it is education.

We’d go around the house again and pick another stock.  We’ve had Disney, DuPont (Mini Fox was obsessed with chemistry for a while), Vail (since Dad goes skiing every winter), and a bunch of others.  Right now Mini Fox is in Facebook because they own Oculus Quest 2 which he loves, and ‘Lil Fox is in Hasbro.

Celebrate the wins

A key to keep the kids engaged is to show them how they’re doing.  Obviously it’s more fun for them if the market is going up (dollar cost averaging is not a concept to teach right now 😊).  Fortunately, since we started this last summer, the stock market has been on a tear, up about 40%, so there have been a lot of wins.

Every few days I show the cubs what their stock is at.  Ironically, they don’t seem nearly as interested in how their stock is doing as much as “Did mine do better than my brother’s?”

Early on, ‘Lil Fox was rivaling Buffet.  He picked Valvoline (we got our oil changed there), Exxon (where we get gas), Toyota (I drive a 4Runner), and Pulte Homes (they built our house) all did tremendously well.  I’d call him a stock picking genius, and he had a lot of fun telling his friends that.

Mini Fox didn’t do as well (he invested in Tesla early but missed their huge run up) but made some good picks with Catepillar, Microsoft, and DuPont. 

As of today, ‘Lil Fox is up on his brother, but they’re pretty much in line with the market.  That said, it’s a few hundred dollars in profit, and that gets them really excited, and that’s kind of the whole point.

Who knows if this is a good approach or not, but I think it’s important that the cubs dip their toes in.  This is how we do it.  What do you do?

Teaching kids about money—Part 1

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Wow!!!  We’re going for the throat on this one.  Teaching kids about money is one of the hardest and most complex and most controversial and most personal of tasks facing parents and society at large.  But that’s never stopped us before.  Let’s take this topic on and see how many readers I can piss off.

As a kid I remember home economics class.  This was in the early 1990s and the shadow of “this is really a class for girls” still loomed, although that was definitely changing.  Reflecting on it now, that was probably the most important class I ever took in school and I blew it off.  Skills like how to prepare a healthy meal, balance a checkbook, plan a large purchase, do a load of laundry—those are important.  Want to know what knowledge I haven’t really used a lot as an adult: trigonometry (and I’m a huge math nerd), the generals of the Civil War, how to diagram a sentence, which colors complement a blue background for an art project.

The point is, the most important life skills aren’t taught very well in school these days.  That’s a topic with a lot of deep water and could consume hundreds of blog posts.  But in the here and now, we reynards and vixens (did you know that’s what adult male and female foxes are called?) need to teach the cubs about money and managing their finances.

I will be the first to admit that I’m not perfect at this.  I am constantly learning and tweaking what I do, but here are a couple ways I try to pass these lessons on to ‘Lil Fox and Mini Fox.  If you think my approaches are good ones, feel free to steal them; if you think they suck, feel free to give me some pointers.


For cubs as old as ours are, the allowance is the central element of the cub economy.  I pay each cub one dollar per work day (weekends not included).  This is payment for all school related work which Foxy Lady and I purposely call their jobs (“You know how Dad and Mom have jobs that make money?  Well, school is your job.”).

Additionally, the allowance pays for chores that they need to do.  We’ve been working on expanding this list, but admittedly we aren’t great about that.  Some times it’s easier to do it ourselves than work with a 7- or 10-year-old to get it done.  That said, taking in the dumpsters after trash day, taking dishes to the sink, cleaning their rooms, and putting away their backpacks and shoes are their main chores.

Every Friday is payday and I give each cub $5 for the week of work.  I go to the bank every couple of months and withdraw $100, all in singles.  Each cub gets five one-dollar bills.  This was purposeful because I think getting a bunch of bills has a bigger impact than just getting a five-dollar-bill.  Maybe I’m right on this, or maybe I’m wrong.

Spending it

I feel I am probably over-paying for the allowance, but then I am pretty mean when it comes to what the cubs need to buy, so I figure that balances things out.

With their money they have to buy: Slurpees, any toys that are not birthday or Christmas gifts, gifts for their friends if they are invited to birthday parties, their season passes to Carowinds, and any video games.

It’s funny when we go out and I stop at a gas station to get a soda.  Mini Fox ALWAYS asks if he can get a Slurpee.  When I tell him he has to pay for it, he really thinks about it.  Sometimes he says “yes” and other times “no”.  That’s really the whole thing I want to accomplish.  If they can understand that if they want something it costs money, and that money comes from their hard work, then I think I’m winning. 

Also, we’ve had a lot of conversations at Wal-Mart about something they want to buy but they don’t have the money.  This leads to good conversations about them saving, and how long it would take (If it costs $22 and you have $8, how much more do you need?  If you get $5 each week, how long will it take?).  Also, the two of them can strategize about pooling their money, but then they have to share it and only pick something they both want.  That seems like parenting wins there.

Saving it

Obviously the other big concept is saving.  For us this is equal parts conceptual and physical.  Conceptually, we talk about those things above—if you want something you need to save to get it.

Physically, we talk about where the cash goes.  Remember, they are getting five one-dollar-bills each week, so it adds up.  I bought them little plastic storage units for screws and nails and things like that from Lowes.  They keep their money in those, and we call it their banks.  When we go out they need to carry their banks with them in case they want to buy something.

I also set up bank accounts for them.  Most banks allow something for kids which waives all the low balance fees.  That’s what we did at Bank of America.

For the bank, that’s a bit of a ritual where I take them and make sure they handle the transaction.  They have to take the cash out of their bank, count it, and give it to the teller.  When they’re done, they ask for a receipt with the balance on it.  It’s important to me that they physically handle everything so they understand it all.

Generally, they hate going to the bank because that means they “don’t have their money anymore for toys at Wal-Mart”.  That’s a bit of a miss and a concept we’re working on. 

I also try to stress that banks keep their money safe.  This became real for Mini Fox who lost his bank with about $70 in it.  He was sloppy with it and not paying attention and lost it.  Yikes!!!

I have a feeling I know where it is, but I’m content to let him painfully stew on this one for a while.  Hopefully he’ll remember this feeling and see the value of protecting him money at a bank.

Dang.  This one is already at a thousand words.   Why don’t we split this into two posts and later in the week we’ll talk about how I have introduced stocks to the cubs.

See you then.

Now it’s cheaper to be rich

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After you do all the smart things with investing and become rich, you then have to show others how you’re better than they are.  Afterall, what’s the point of amassing wealth if you can’t feel good at the expense of others.

Early in my life (the 1980s and 1990s) this was easy.  You could buy expensive stuff, conspicuously display it, and you were set.  Life was easier back then—the more expensive something was, the better it was, and the better it made you.

However, in my adult lifetime (let’s say starting in the 2000s), it seems that centuries-old, tried-and-true concept has been thrown on its head.  Those outward appearances of wealth, namely expensive things, have become less reflective of your wealth (or what you would like others to think your wealth is).  Some of it is technological advances, some of it societal changes, some of it changes in taste.  But it’s undeniable that it has become cheaper to be rich.


Growing up, a Rolex was wealth and success in its purest form.  As far as watches go, they are beautiful but not the greatest timekeepers.  A mechanical watch can’t keep time near as well as a quartz or digital watch.

Yet, when I was a kid, if you saw someone wearing a Rolex and another person wearing a Timex, it was clear which one was, or at least seemed, richer and more successful.  Of course, that wasn’t necessarily the case (see, The Millionaire Next Door).

For me personally, my parents gave me a Rolex as a gift when I graduated from Pitt.  They were giving me a watch but so much more.  It was a sign of my accomplishment, my achievements to that point, and their confidence of my future successes.  Congratulations to Rolex’s marketing department.

Today I still have that Rolex but I never wear it.  Rather, I wear a smartwatch.  Despite being rich, I choose to “show off” my $150 Apple watch instead of my $6,000 Rolex.  Certainly for me it has a lot to do with functionality: my Rolex tells me the time and date (and those not very well), while my smartwatch tells me those plus emails, texts, my calendar, a stopwatch, the weather, and on and on.

People can always choose function over fashion, but I think even with fashion the smartwatches have eclipsed the expensive timepieces.  If you got 100 millionaires in a room, do you think you’d see more smartwatches or Rolexes?  I think smartwatches in a landslide.

The point is, if you’re rich, you don’t need to have a four-figure watch on your wrist.  You’d more than fit in at a small fraction of that.


Clothes have always been a fashion item, and that continues to this day.  It boggles my mind that some jeans can cost $20 and what looks to my uneducated eye as the exact same thing can cost $300.  Whatever.

That said, a couple decades ago it was a lot more expensive to dress like a successful person, especially at work.  My professional career started with Medtronic at the very end of the 1990s.  That was just when corporate America was transitioning from suits to business casual. 

Of course, if you were rich, that meant you had a good job, and if you had a good job you had to dress the part.  A typical work outfit would be a suit ($300—and these are moderate prices, you would certainly go much, much higher), a dress shirt ($30 plus dry cleaning), and tie ($20).  Compare that to a business casual outfit of the same caliber which would be a button-up shirt ($30) and chino pants ($30).

That’s a difference of $350 compared to $60.  And that doesn’t account for the little extras on a suit that could accentuate how rich you are like cuff links or a tie clip.  Plus, it’s even more expensive in that back then you needed both the suit and the casual clothes.  So your total cost was $410. 

Today you don’t really need the suit at all and can just get by with the business casual.  You’d look just as rich as before but just have to spend a lot less money.


Cars are another way to really show off how rich you are.  There have always been cars to get you from A to B.  But it seems there’s been a real change in how we perceive them.

As a kid, I remember that Mercedes or BMWs represented the cars that rich people drove.  Sure, there were Yugos and Civics and Chevettes that did the same thing, but they clearly weren’t driven by rich people.

That price difference, back then a top of the line was $80,000 and a lower-end car was maybe $9,000, made a huge difference in perception.  I am sure it happened, but I couldn’t imagine a millionaire choosing a car like the one we had (haha!!!) over a Mercedes with every bell and whistle imaginable.

A young Stocky standing in front of our Chevette.

Today, I think brands like Prius and Tesla have turned that logic upside down.  A top-of-the-line Mercedes or BMW costs about $130,000 and a Ferrari or Lamborghini is in the $250,000.  Compare that to a Prius at $25,000 or a Tesla at $40,000.

At least for me, if I saw a Prius lined up next to a Mercedes S-class, I wouldn’t necessarily think the Mercedes owner was richer than the Prius owner, rather I would think they were different.  One was more ecologically conscious, and that could very well correlate with wealth.  Back when Foxy Lady and I lived in LA (in the early 2010s) Priuses really took of and I felt at the time they were every bit as fashionable as a BMW 7-series, maybe even more so.

The point of all this is that as society has evolved over the past 20ish years, fashions for the rich have changed.  They have changed in a way that makes those really expensive outward appearances of wealth less important and less closely linked to how rich you actually are.

To me that’s a great thing.  I’m a millionaire but I am also EXTEMELY cheap (cut to Foxy nodding in agreement).  It’s looks like I’ve finally become fashionable. 

Top 5: Things to do with your finances when you’re just starting out

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Love must be in the air. The past couple weekends I’ve run into a few young couples who either just got married or are about to get married.

It got me to thinking about what are the most important things to do in the world of personal finance when you are just getting started.  For the soon-to-be newlyweds, here is my Top 5 list:

5. Figure out your debt situation: If you’re lucky, you won’t have a lot (or any) debt.  For most of us there is some out there, and that isn’t necessarily a bad thing.  List out every debt you have (student loan, mortgage, credit card, car payment, etc.), the balance, and the interest rate.

On a spreadsheet (see #4) rank them in order of interest rate.  As a general rule I use a cutoff of about 6%.  If your interest rate is above that pay those off right away, starting with the highest interest rate debt first.  If your interest rate is below that, that might be okay to keep that debt and just make the normal monthly payments.

If you have any debt (especially credit card debt) at any rate higher than 10%, that’s a “debt emergency”.  Really look at every purchase you make—if it’s not critical to your survival (food, shelter) then pass that up until your debt is paid off.  The only exception to this is #1—funding your 401k.

You can get creative with your debt by consolidating high interest rate cards onto a lower rate card or one that offers a low teaser rate.  That could save you a ton of money, and you should probably look into that, but ultimately, you’ll need to pay that sucker off.  So just hitting the grindstone of paying off your credit cards is a must.

4. Make a budget on a spreadsheet: Take a spreadsheet and put a quick budget together that includes your income, your expenses, and the difference between those two.  This can be simple at first (and it should be simple at first).  Over time, you’ll add more and more sheets to the spreadsheet for things like your mortgage, investments, kids’ education, and other things.

But at the beginning, you need to get a sense of where your money is going.  The budget will give you an aspirational view of this.  After your budget is done, you can track your spending with a website like  This two-step process lets you figure where you want to spend your money, and then also look at where you actually spend it.

Of course, this is an iterative process, and as you close a month and look at your expenses, you can see if you’re spending more than what you budgeted.  This isn’t a time to beat yourself up (being too hard on yourself is a sure way to stop looking at your finances closely, and that’s a REALLY bad thing), but a time to ask yourself why you spent more and if it was worth it.

As an aside, using a spreadsheet is a really good skill in general.  I was really good at spreadsheets and it’s hard to overstate the incredible impact it had on my career, as well as the incredible wealth those skills gave me and my family.  And really, my experience with spreadsheets started in college when I was creating a financial budget.

3. Educate yourself on investing: At a young age, educate yourself on investing.  Obviously, this blog is the universally acknowledged best place to learn about investing, but I have heard rumors there are others. is a great website that looks at personal spending and his early posts had a tremendous impact on my outlook.  A Random Walk Down Wall Street is a book on investing that really defined my investing strategy; I read that as a 19-year-old and still think about its insights today.

There are a lot of websites written by millennials about spending and personal finance that might resonate even more.  A few are:,, and  Most are about reducing spending and budgets and that sort of thing, but there are some on the nitty gritty of making investing choices.  You’ll want perspectives on both.

The whole point is that you need to know what you are doing here.  Spending 20 hours early in your life to figure out basics like asset allocation, tax avoidance, and fee minimization as well as a general attitude towards saving early can easily lead to hundreds of thousands or millions of dollars.  That comes to about $50,000 per hour—not bad.

2. Start an IRA with $1,000: This is as much about the experience gained as it is about actually investing your money.  Vanguard lets you start an IRA with $1,000 as the minimum amount.

You’ll navigate through their website, figure out how to make choices (like Roth or Traditional IRA—go traditional).  You’ll pick your investments, and then you’ll have something to look at every once in a while to see how it’s doing.

So many people are just at a total loss when it comes to setting up accounts for their investments.  That becomes a real problem once you hit 30 or 40 and you’re starting to get behind the 8-ball; you know you need to do something but are kind of clueless on where to start.  Doing it now lets you get your toes wet in this world and makes the next accounts you need to set up (529, 401k, brokerage, etc.) all the less daunting.

1. Get the company match on your 401k: #2 was more for experience than for investment.  Here is where you should start walking down the path for investments.  At a minimum, contribute the match and take the free money.

This is so important for a couple reasons.  First, you’re getting that free money.  Second, you’re making your first “asset allocation” decision.  When it comes time to pick which fund to invest in, unless you have very unique circumstances for an early-20s person, I would definitely go with a 100% equity index fund.

Third, your 401k is a really powerful tool.  If you had no other investing tool, you could still grow a 401k to well over a $1 million during your working career.  That is enough to fully fund your retirement.

BONUS—Stay poor:  Too many young adults make a huge mistake of trying to mimic the lifestyle their parents provided, once they (the young adults) get out of school.  That first paycheck of $2,000 is going to seem like a ton of money (and it is).  It’s really tempting to decide to buy a new car or go on a kickin’ vacation or upgrade the furniture.  Resist the urge.

Your parents took 25 or more years of working (with pay increases and investment returns) to provide the house and cars and vacations you enjoyed your senior year of high school.  It’s not realistic to think you can have stuff at that level of niceness so early.

A car is a really good example.  In general, automobiles are horrible investments.  To the degree you have a car that can get you from point A to point B, keep it.  A new car will be nice and cool and make your friends gawk, but it’s a horrible use of money.  A couple hundred dollars a month for a car, plus insurance, and maybe $50 for a gym membership, $50 for cable, and $80 for four dinners at a restaurant—those numbers add up.  Those alone could fund your savings in the early years.

Your early 20s are a time when it’s still okay not to have the best and nicest of everything.  If you can embrace that, even when you do have the money, and put that extra money to work in investments you’ll build a very strong financial foundation that will afford you many more opportunities are you reach your 30s and 40s (remember, I did that and I retired at 36).