Your financial plan should plan on inflation

When I entered the financial services industry many years ago, people turned to advisors for investing information because there was no Internet back then. Today, people seek advisors to help sort through the overabundance of conflicting information that’s posted on the Internet.

With so much data, it’s difficult to determine what’s accurate.

I think a lot of the confusion has to do with meaning and context. For example, the word “goat” seems simple enough. If

I’m reading a book to my grandchildren, it’s a farm animal.

There’s a picture they can see and understand. If I’m with a group of buddies talking football, Tom Brady is a GOAT. The greatest of all time.

But at the office, my colleagues and I often talk about GOAT investments (Get out and travel), which refer to such popular postpandemic investments as airline and hotel stocks.

At the end of the day it’s all about content and communication.

Unfortunately, I think the more we utilize technology the more our communication skills decrease.

When I’m on the road, I like to ask small business owners how they’re doing. I recently spoke with the owner of a landscaping service in northern Michigan. He told me the cost of running his crew has jumped substantially. When he said crew, I thought he meant employee wages.

I was wrong. For him, crew had a much broader meaning.

In addition to wages, his definition included tools, equipment, fuel costs and supplies. So our conversation started with miscommunication.

What’s more, he was legitimately puzzled about why a plant that cost him $8 last summer, costs nearly $35 this year.

He’s fearful that customers will think he’s gouging them. But he’s just trying to do a good job for them. He’s forced to pass along price increases to make a decent living.

It’s not a whim; it’s a necessity.

He was certainly aware that every single aspect of his business was costing him a lot more money. Not to sound condescending, but he was not aware of a bigger, more complex picture.

An economic explanation of his issues can be summarized in one word.

Inflation.

As I mentioned, financial advisors help people sort through an overabundance of information. On occasion, we tend to overcomplicate our explanations by enumerating the 10 reasons why we have inflation.

The simple solution to my landscaper’s situation is pretty straightforward. With everyone else raising their prices, you have no choice but to raise yours. If you want to stay in business.

This is not our nation’s first bout with inflation. As advisors, we factor in that goods and services cost more over the years.

If you don’t plan on prices increasing over time, you’re ignoring history.

When I look at my clients who are financially secure in retirement, it isn’t so much that they chose the right investments for building a nest egg. Rather, it’s because when they were young and beginning their careers, they chose to invest and stick with it.

And they did stick with it, in good economic times and bad.

With all the ups in downs in their lives, they were able to set aside money for retirement every pay period.

They understood that, over time, things tend to get more expensive. You should plan on it.

When I look at my clients who are financially secure in retirement, it isn’t so much that they chose the right investments for building a nest egg. Rather, it’s because when they were young and beginning their careers, they chose to invest and stick with it. And they did stick with it, in good economic times and bad.

Email your question to kenmorris@ lifetimeplanning.com Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Society for Lifetime Planning is not affiliated with Kestra IS or Kestra AS.