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Inflation: Did Mr. Money Mustache get it right?

A couple days ago, I asked my community of women about the impact of inflation on their finances.

Here are the questions I posed:

  1. Have you noticed the impact of inflation on/in your finances?
  2. What’s gone up in price in your world? Tell me specifically (gas? groceries/veggies? services? costs for your business? etc). Is this significant for you?
  3. Have you changed your buying patterns or choices as a result?
  4. Has inflation changed how much you’re able to spend in a particular category or how much you’re able to save/invest?
  5. Has your income gone up to match the pace of inflation in the last two years? Is it likely to?

The reason I wanted to hear from them about this is that I had read a blog post by Mr. Money Mustache in which he argues that the panic over the current inflation rates is overblown. We all need to just chill out and realize that it’s not that big a deal.

He ended his post by saying this:

“As always, it’s an opportunity for learning rather than worry, and even more importantly: you have more control over it than you might think.”

As I read his post, I kept thinking, “Hold on a second. Is that really true?”

Something was bugging me about what I was reading.

I eventually figured out what it was: We need a more nuanced consideration of the impact of inflation, particularly on women.

Hat tip

Let me start off by saying that I’m a fan of Mr. Money Mustache (MMM). If you haven’t heard of him, he is an influential voice in the FIRE (Financial Independence, Retire Early) movement through his blog.

His real name is Peter Adeney, and while he lives in the US and writes from an American perspective, he’s Canadian-born, so that’s another point in his favour. 😉

He has written extensively on topics ranging from the benefits of living more frugally, how to retire early, and reducing your environmental footprint by buying less crap.

I enjoy his posts and I typically find myself nodding along. But this post – Inflation – Should we be worried? – gave me pause.

Don’t get me wrong; it’s an excellent post full of the kind of stuff I like –> real data and evidence-based analysis. Love that.

But there’s more to the story and it’s not so rosy for some.

Let’s take a look at what I mean and back it up with intel from my community of women.

 

What he’s saying

The post starts off with a look at data about the US economy.

The charts he shares clearly show that across the world, people are getting richer as compared with the levels of wealth a century ago.

That doesn’t mean that poverty has been wiped out; far from it. It just means that we have experienced a “long economic boom” and many more people are richer as a result.

Not necessarily rich; but richer.

Saying this has, of course, opened him up to criticism from people saying, “What about inflation? That and the government’s response are a big problem.”

MMM does a great job of presenting a mini lesson in economics, covering:

  • what causes inflation
  • inelastic/elastic supply & demand
  • price competition
  • the deflationary impact of tech in the long run
  • and some of the benefits of inflation

It’s when he got to the impact of Covid and “what happens now” that my reaction was “Say what?”

The fallout from Covid

MMM lost me when he said this:

“… we were all stuck at home with extra money, meaning we spent less on restaurants and more on stuff from Amazon, appliances, new cars, and so on.”

Sure, Amazon purchases went way up as everyone spent the entire day in front of their computer, but sitting at home with extra money?

Huh?

OK, salaried workers whose paycheques kept coming regardless of Covid accumulated cash while the world was shut down and they couldn’t spend in as many places as usual.

But small business owners whose offerings depend on in-person interactions?

Wage earners?

Contractors outside of IT?

Freelancers and so many more people?

They took a pounding. 💥

The pittance offered by the government certainly did not help them accumulate cash in the bank.

As one freelancer told me, “I sure as hell did not accumulate savings on the government’s payments of what worked out to be $12 per working hour. I barely survived on that.”

This doesn’t even take into account the number of women who left the work force to care for children who suddenly had no daycare and no in-person school.

According to this report, nearly 2 million women left the workforce between 2020 and 2022, either because they flat-out lost their job or because they needed to deal with the fallout from Covid at home.

And that’s just in the U.S.

Overnight, these women became unpaid daytime caregivers and school support staff, as they helped their kids navigate the realities of online learning and Covid-related mental health issues.

Now add 5% inflation to that scenario. Much-reduced income and higher levels of debt for some meets increased costs for essentials.

See a problem?

 

“Enjoy the whole journey as a learning experience”

Dude actually said that.

“The first rule of this situation is the same as all other situations: don’t panic, and enjoy this whole journey as a learning experience. Prices will fluctuate, and the world’s economy will adjust according in the coming year. You and I will continue to prosper.”

Where to start. 🤦‍♀️

Many may well prosper in the end, but in the meantime there is a crap ton of pain, stress, exhaustion, overwhelm, and financial strain for many, many women.

I get where MMM is coming from with part of the statement above. The recommendation to not panic is a good one. Panic doesn’t serve anyone.

But to just toss out a “chill out, it’s all going to work out in the end” ignores the real hardship experienced by millions of women around the world due to Covid, first and foremost, then inflation tossed on top of it.

When your coffers are reduced, rising prices hit harder.

Cue more stress and worry.

When women who are dealing with a world of stress are told – by a privileged white guy no less – to enjoy the journey as a learning experience, they can be forgiven the uncomplimentary words that come to mind.

 

“Your salary should also be rising”

More from MMM:

“Your salary should also be rising. At least keeping up with inflation but ideally much faster if your skills are growing. If you don’t see this, negotiate a raise and simultaneously start shopping for new jobs.”

Agreed, salaries should be rising and should be keeping up with inflation, but that’s not happening across the board.

Earlier, I mentioned that I had reached out to my community of women to ask about the impact of inflation and whether or not their incomes were going up as a result.

The majority of women I heard from have not had salary/income increases in line with inflation.

Not even close.

They include teachers, healthcare workers, members of the military, civil servants, small business owners of every stripe, contractors, freelance writers, daycare owners and workers, professionals at private corporations, and many more.

Nor do they expect to receive such increases in the next year.

Here’s a small sampling of the responses I received when I asked the women in my community if their incomes had kept pace with inflation:

S.B., military: “Last year, I got a lump sum back-pay (govt took most of it) and my pay has increased 1.697% on average.”

[Don’t you love the precision of a military gal? 1.697%!]

D.L., solopreneur: “My hourly income has not increased, however additional clients mean additional funds. Household income is consistent as [my husband’s] job has inflation linked annual increases.”

[In other words, her husband’s income is rising, but hers isn’t. To make more money, she has to work more.]

P.R., civil servant: “No, my income has not increased as a result of inflation.”

N.L., consultant:  “It has not. I am a consultant on a fixed per diem. I had a negligible raise last year ($2/day) when my contract rolled over to a new company.  It is not likely to, either.”

A.L., civil servant: “Hell no!”

 

You know who is doing well?

Realtors, mortgage agents, psychotherapists, and people in the tech sector.

D.G., realtor: “Real estate is incredibly good. Expenses went up but holy cow, so did my income!”

[The market in her area experienced a 24% increase in average house prices from 2020 to 2021. No wonder she’s happy!]

A.K., psychotherapist: “Yes, rates in my industry are going up as is demand.”

P.L., software developer: “Oh yes. My employer offered us significant increases because of the competitive market. It was that or they knew I’d move to another job and get that extra money.”

That crazy hot real estate market in many parts of Canada translates into a hefty raise for realtors and mortgage agents.

And all those stressed out parents, kids, and business owners? They’re creating a boom in the field of mental health.

 

“Substitute things to create happier days and lower costs”

One last quote from MMM:

“If steak is getting more expensive, make something else for dinner. If gasoline prices are spiking, just plan your life to include more local activities and less driving.”

Cut back on driving sounds like a sensible piece of advice, but how do you do that if the kids’ daycare requires a 15-minute drive (as was the case for me when my kiddos were younger) and you work odd hours or at an out-of-the-way place?

You know which daycare you send your kids to?

The one that has spots available and that you can afford. You don’t always get much of a say.

And if you’re a single mom of two kids, you’re not going to give up your car to take transit when you have to get Maggie to daycare and Jimmy to preschool, then hope like hell that you don’t get a call part way through the day with news that your kid has been throwing up.

Food

As for food, the significant increase in costs for groceries was mentioned by just about every woman who responded to my call for feedback.

The jump in prices is causing women to rethink their meal planning and swap out ingredients, which may save some money, but adds to the psychological load, which is already an issue for women.

I heard from a retired health professional who is on a fixed income. The increase in gas and food costs alone are causing her stress. “It’s not like I can ask for a raise,” she said. And she’s already living a pretty frugal lifestyle. There isn’t much fat to cut.

The bigger deal

Many of the women I heard from were still able to preserve the amount of money they invest every month, mostly because they had sufficient income (or their partners did) and they had prioritized saving and investing.

To save money, they cut back in other areas of their life – travel, repairs, renovations, treats, going to restaurants, and so on.

But what of the women who are not able to save and invest courtesy of the Covid and inflation double whammy?

They are not growing their wealth.

And that’s a big deal for women, because wealth = choice and protection.

They already have a fraction of the wealth that men have. The current situation is only going to increase their vulnerability.

All of which brings me to my final thoughts on MMM’s blog post.

I like the way he explained the economics behind inflation. I wish my economics course in university had been that clear.

He makes some great points about why inflation isn’t the end of the world.

But he totally misses the reality for millions of women who are feeling the brunt of inflation.

It may not be the end of the world, but it sure as hell isn’t a walk in the park.

And while some of his recommended cures – delay expensive things, spend less – are fine, others do not land well for the legion of women who have been struggling for the past two years.

Here’s what I wish for you in 2022:

  • That you know and fully appreciate your value, then ask for that in the marketplace.
  • That you find the support you need to grow your marketable skills, if need be, so that you, too, can benefit from the economic sectors that are paying well – and keeping pace with inflation.
  • That you find a job or business that is fulfilling and financially rewarding.
  • And that you know your challenges and your struggles are seen and acknowledged by me. I appreciate how hard it’s been for you.

If you are one of the women who have been rockin’ it financially despite Covid and the inflation rates, that’s awesome! You go girl! Enjoy every second – and every dollar – of it. Seriously couldn’t be happier for you.

For everyone else, hang in there. In the next few days, I’ll share my take on what you can do to fight inflation. (And I swear to God I will not tell you to avoid buying steak….)

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2 Responses

  1. Preach. He also doesn’t acknowledge that there is a massive amount of emotional labour that is tied in to managing personal finance and that emotional labour is primarily a female domain. Who is it that is making a million behind-the-scenes micro-adjustments to make sure a family doesn’t feel the increased cost of milk or the decreased size of cereal? Overwhelmingly, it’s women. Raising costs mean raising emotional labour. I’ve heard about women who, unable to afford the usual variety of items on their grocery list, are going out of their way to make their modestly-priced groceries still be appealing to kids (like cutting pancakes into shapes with cookie cutters, decorating homemade pizzas so the ingredients make a heart). Grrrrr

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