EPISODE #005

Inflation, i-bonds, and your Financial Inventory

“When I was a boy of fourteen, my father was so ignorant, I could hardly stand to have the old man around. But, when I got to be twenty-one, I was amazed at how much he’d learned in seven years..”
 – Mark Twain

Financial Inventory:

    1. Summary of all financial life decision to this point
      • Assets (what you have)
      • Liabilities (what you owe)
      • Insurance (risk shifted)
      • Cash Flow (money in / money out)
  1. `Materials & Resources List’ for designing and building your financial custom home
    • What is still needed prior to retirement
  2. Categories for designing your Retirement Plan
    • BASIC NEEDS
    • EXTRA WANTS
    • ASPIRATIONAL WISHES
  3. ‘proactive’ choices keep you in the driver’s seat vs. ‘reactive’ issues

Inflation:

  1. $1 of goods and services last year now costs more – $1.05, $1.07, etc.
  2. Key Point: investments in “productive assets” can be inflation hedges, can help maintain purchasing power over timeProductive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it. Most owners of such properties will be rewarded. – Warren Buffett
  3. Key Point: If over the next 5-10 years you do not plan to spend the funds in a particular investment account, then maybe you should welcome the opportunity buy partial ownership in a good business at a discounted price.The stock market is the only market where things go on sale and all the customers run out of the store. – Cullen Roche
  4. Bonds – the ‘flip side’ of investment portfolios
    • Traditionally, more price stability and yield/income generation
    • Low rates have detracted from effectiveness
    • Alternatives?
      1. Be careful to evaluate the potential for increased risk in alternatives
        1. Certain annuities and EFTs may provide upside potential with some downside protection
      2. ii. Think outside the box – barbell strategy example
        1. ‘Contingency Money’ and ‘Risk Assets’/li>

i-bonds; making lemonade out of lemons

  • ‘Inflation linked’ savings bond issued directly by the U.S. Treasury
  • $10k per person per year limit
  • 30 year maturity, but can be redeemed after 12 months (redemptions in the first 5 years give back last 3 months of interest)
  • Current ‘fixed rate’ 0% + inflation adjustment 7.12%; (for issues 11/21 – 04/22
  • Rates reviewed and adjusted every 6 months

Resources

Financial Inventory – https://getthereonpurpose.com/wp-content/uploads/2022/03/SCP_Financial-Inventory_blank.pdf
i-bonds – https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
BOOK – Rock Retirement: A Simple Guide to Help You Take Control and be More Optimistic About the Future by Roger Whitney
Inflation https://www.usinflationcalculator.com/inflation/historical-inflation-rates/

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