Inflation is simply the phenomenon of prices going up everywhere. But the reality is we don’t need to just keep up with the pace of inflation, we need to outpace inflation.
In this episode of The Lawyer Millionaire, Darren Wurz talks with Travis Wurz, a financial goal planner and consultant at Wurz Financial. They discuss how you might be impacted by inflation in your daily life and why it’s important to have some sort of risk managed strategy in place.
Darren and Travis discuss:
- What inflation is and what causes it
- Some of the biggest concerns on people’s minds with inflation on the rise
- The two tools the government can use to deal with inflation
- And more
Connect With Darren Wurz:
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- Wurz Financial Services
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Connect With Travis Wurz:
About Our Guest:
Travis Wurz specializes in serving business owners, realtors, and self-employed individuals. He primarily works out of the Toledo office. He is a graduate of the University of Toledo with a Bachelor’s degree in Financial Services. He has both his Series 7 and Series 66 licenses.
In his work with real estate professionals, he has found that his clients are interested in building up passive income. He helps his clients create a diversified income stream, build long term wealth, and plan for retirement.
Travis is passionate about continuing the family legacy of providing sound and intelligent planning services to our new and existing clients. He is active in his local community as a member of the Maumee Chamber of Commerce, The Chamber Partnership, and the Women’s Council of Realtors.
We are on a mission to help the lawyers and law firm owners maximize wealth and achieve financial independence. Welcome to The Lawyer Millionaire with Darren Wurz from Wurz Financial Services. In this podcast we will help you build wealth, minimize your taxes, and plan for retirement with money management strategies designed for the legal profession. Join us in this journey where we help you manage your money so you can make the most of your future. Start feeling confident in knowing you are well-prepared for retirement and on track to financial independence. Now on to the show.
Patrice: Inflation may not be as sexy topic, but it impacts more than you may think, including investments. Well, Darren Wurz, tackles inflation today with a guest. His brother, Travis is also in the family business of financial planning with a focus on realtors. Travis, tell us a bit more about your [00:01:00] education and what you do.
Travis: Yeah. Hi, my name’s Travis Wurz. I went to University of Toledo and work up here. I work with a lot of real estate agents. I specialize in planning for specifically self-employed people, how to set up retirement, accessible investments and just overall planning when you’re self-employed and the struggles that that can cause.
Patrice: But Darren, you said today, we’re going to talk about inflation, right? So everybody’s talking about it–prices are going up just about everywhere, but tell us exactly what is it.
Darren: Yeah, what is it? We’re seeing it [00:02:00] everywhere, right? In the headlines. It’s like, it’s all over the news. We’re seeing it in political advertisements. Now, as we’re getting close to midterm season and all that it seems to be the major topic. Right? So, what is this all about?
In its most basic sense, inflation is simply the phenomenon of prices going up everywhere. And I think a lot of us are seeing that in various things, whether you’re buying a car or buying a house, you’re probably seeing it there.
You’re probably seeing it at the grocery store and I’ve certainly noticed my grocery bill has gone up recently. You know, and it’s funny because like my car, I drive a Camry and it doesn’t cost very much to fill up, but you know, it used to be 30 bucks now it’s 50 bucks, you know?
So, [00:03:00] yeah, we’re seeing this everywhere. The price of everything seems to be going up and we’re seeing it in some really focused areas, like used cars and things like that, you know. It’s this phenomenon. And Travis, you’ve had some education in economics and business. Tell us what, what causes all this? What is this all about?
Travis: Yeah. Well, I think the technical definition is the rate at which our prices in goods and services rise, but no, you drive a Camry. So, try having a truck. I used to drive a Mustang, but I sold it for a Jeep. I thought that you’d get better gas mileage, but actually it got worse.
So what is causing it? I think you can’t really pinpoint it on one thing. It’s just like so many things are all coming together that can be causing it, like recently what China’s going into another lockdown. [00:04:00] And that’s not going to help our already continuing supply issues. When we came out of COVID or not came out of it, but like the initial lockdown, I think that the demand rebounded very quickly.
And there wasn’t the supply chain to support that. I think that caused a lot of problems. Obviously, this war with Russia and Ukraine being big oil exporters because we talk about gas. So, I did also hear this thing. Like people are expecting to make more money, you know, like I want to make more, I should be making more now that everything costs more money.
And I don’t know if you’ve ever heard of a wage price spiral but I was reading about that. It’s where people basic people are demanding to make more money because everything [00:05:00] costs more. But then if they’re paying people more then the cost of goods go up and it ends up creating like this spiral until inflation comes down.
I was just reading about that other day. I think we’re seeing some of that. Aren’t they terming that the great resignation, you know, there are so many people looking for workers. They’re willing to pay a premium and people are switching jobs, looking for other opportunities where they can earn more, you know, so, yeah, I think we are seeing a lot of that.
Darren: I know you mentioned something interesting about selling your Mustang and buying your Jeep. And there was a weird thing that happened when you sold your Mustang?
Travis: Oh yeah. It was crazy because of inflation.
Darren: Tell us about that.
Travis: Yeah. And this wasn’t even recently, I mean, it was recently, it was a year ago almost exactly. I put this car for sale and you know, you look it up on Kelly Bluebook. That’s what I [00:06:00] did. I just put I tup for sale with the very highest price that it could possibly get. I thought I never would get that because it had an accident and a hundred thousand miles.
And I think I was like, right before I went to bed, I just posted it for like 24,000 or something. And then the next morning I had a message from a dealership and they said, Hey the price is fine. We’ll drive to you. We have cash. I’m like, this doesn’t even seem legitimate, but they did.
They came to me, they were driving another car that they had just bought. They said we don’t have any used cars, like we don’t even need to make money on them or anything we just need things to sell. It’s just crazy. And so they’re willing to pay a premium.
Darren: Yeah. And then we had another recent experience. I totaled the family car, which was, uh, which was not great. We won’t get into all of that of [00:07:00] course, but you know, mom and dad went to buy a new van and the price that the insurance company paid was more than the original cost of the van. So it is really, really crazy. And it is crazy. I mean, the levels that we’re seeing now are levels that haven’t been seen since the 1980s.
CPI is one way economists measure inflation. It’s the consumer price index. Basically, you have a basket of different goods and services and they track how they change. And then there are adjustments for seasonality and things like that. But the CPI annual rate last it was put out was I think, eight and a half percent, which is insane. So last year from last year to [00:08:00] this year, the average price of things has gone up eight and a half percent.
And Travis, in stuff that you’ve studied, is this something that’s kind of new or have we seen this before at some point?
Travis: Well, you know, some part of inflation is normal and it’s normal to have inflation. There is a group of people that argue that the point of inflation is to combat deflation. So it is normal, but it hasn’t been this high since the 1970s and early eighties when things were this high. So it’s normal to an extent but it’s not normal to see these spikes like we have. I think everybody’s talking about it because when it is normal, you know, like 2%, 3%, that’s kind of how it’s been the last 10 [00:09:00] years.[00:09:00] You don’t really feel it as much, you know? A lot of jobs–they’ll give you like a little, 2% bump every year or whatever. So you don’t feel things getting more expensive. But with everything coming together right now, like gas prices, we didn’t talk about houses, but that’s another thing. Like we were looking for a house and there’s two sides of that too, because we’ll probably get into this, but interest rates are going up as well.
So I know what a lot of people are thinking is, okay I might pay more money for a house right now, but it might be okay because if interest rates go to like 7%, but I’m at four and I pay more like maybe my overall cost is the same, you know? So I think that’s also what’s in people’s minds, because I was told that advice by our real estate agent. They’re like, well, if rates are going to go up it might be okay to pay a little bit more and I think that’s causing people [00:10:00] to pay even more which is accelerating this whole thing.
Darren: Sure. And people are expecting those rates to go up. So they’re trying to get in, right? I want to get my house now while I can. So I want to talk about our clients. Are you hearing clients talk about this? What’s the big concern here? In your discussions with people, what are you hearing people say?
Travis: People mostly just hear on the news, inflation this and inflation that, and I think people are mostly just worried. Like, is this going to affect me? You know, should we be worried? A lot of our clients don’t understand everything that goes on. So they want to know like, is inflation going to affect me? Should we move our money to something else?
Darren: And one of the biggest struggles of retirement planning is [00:11:00] inflation. When we do our retirement planning, we use a program called MoneyGuide Pro and it’s a great program because one of the really cool things we can do is build in an inflation rate on different thingsmthat we’re planning for. And usually we put a higher rate of inflation on certain things like healthcare, because your costs are going to grow throughout retirement. And we talked about this in the last podcast episode on retirement planning for attorneys.
We talked about the need to think about inflation seriously, and you know, for a long time, that really hasn’t been something that’s big on people’s minds. But if inflation is as high as it is right now and it stays that way, that’s going to be a really big thing for retirement planning and people are really going to need to adjust their retirement plans.
Because here’s the thing: let’s say you average 10% a [00:12:00] year in the stock market. If inflation is 3%, you’re getting a real yield of seven or something close to it. But if inflation is 8%, you’re only actually making truly, maybe about 2% on your money and that’s just not going to be enough for a lot of retirement plans.
A lot of retirement plans are going to need to be revised to accommodate those potentially higher rates of inflation. Now, the other thing I’m noticing is clients are concerned about their portfolio. What does inflation mean for stocks? Can you give us some clues there?
Travis: Yeah, sure. Well, you know, like you said, last time we saw this was in the late seventies, early eighties, and you know, what are the stock market do then? There was a lot of volatility, but eventually everything did pretty well. [00:13:00] The stock market is a good hedge to inflation. And one thing I want to go back to is you asked me about my clients.
We were talking about houses. I have a lot of young clients that are the same way. They’re like, should I, you know, should I wait? You know, is everything going to come back to normal? Should I buy a house if I’m only gonna live there for five years. So then you get into the conversation about renting, but I don’t know if you’ve looked at how much it costs to rent, which is astronomical as well.
Darren: So there’s really just, there’s no escape. It’s pervasive, which is a really frustrating and difficult thing. And you’re totally right. You know, in the seventies, there was a bear market for a little while. But it didn’t last forever. So that’s the thing, you know, there may be some volatility here and really the volatility is going to be caused by how the Fed deals with inflation and their biggest tool—well they’ve got two tools: interest rates, which they’ve already started raising, and the balance sheet.
And a lot of people don’t understand the balance sheet, but basically the way the Fed helped to support and prop up the stock market during COVID was to go out in the marketplace and buy treasuries and mortgage backed securities that provided liquidity very quickly, very easily to the marketplace.
But their balance sheet expanded to astronomical levels. I mean, they did this in 2008 during the financial crisis. And everybody was concerned then, but what we’ve seen over the last couple of years in the expansion of the Fed’s balance sheet makes that seem like [00:15:00] small potatoes. They expanded their balance sheet by like $7 trillion worth of treasuries.
And economics 101–you expand the money supply to that extent and you’re going to have inflation. It’s all about the money supply. So now they’re in a position where they’re going to start maybe shrinking that balance sheet. The last time they did, this was in 2018. And if you recall in 2018 at the very end, Travis, that was fun. What happened? Tell us what happened.
Travis: Yeah, everything seemed to tank at the end. We had a nice Santa Claus rally, but it wasn’t a good time.
Darren: Yeah, it was very stressful. It was ugly. Yeah. I think the Fed really has an interest in trying to keep the market going, you know, though so if volatility gets too bad, they’re going to back off. But I think it would be right to expect some volatility, maybe not as bad as 2018, maybe [00:16:00] things could be less volatile, but I think that’s, that’s going to be an expectation.
But one thing you mentioned and it’s very good is that stocks generally do keep pace with inflation. Stocks are one of the better asset classes for keeping pace with inflation. You don’t want to put your money in a treasury bond, yielding two and a half percent if inflation is eight. That’s going to be really hard, especially if rates are rising because rates going up means the value of bonds goes down. And so that’s going to be really tough.
Travis: Right. And one of the reasons for why stocks correlate like that with inflation sometimes is as they increase their prices it’s a way for investors to participate in rising prices.
Darren: Definitely now, Travis, I get clients who want to buy certain things. They want to buy commodities or they [00:17:00] want to buy gold. It seems like gold is the one. Okay. So should we buy these things?
Travis: We laught about this. Every week, I have at least one person that calls me and says, I think we should put everything in gold. You know, it’s typically the same five clients, but yeah, I see gold a lot. There are like four things if you Google, what should I buy to hedge inflation? You’ll get gold and commodities and real estate or real estate investment trusts.
It’s a tough question because does hedging inflation mean? If inflation is high, we want something that’s like going to keep up. Maybe inflation is 8%. So we want something that’s going to be up around eight. But maybe next year inflation is around two. So do we want something that also does that? [00:18:00]
Historically gold has kept pace with inflation, but not always. If you look back, like there have been times where inflation has been high, actually I think in the eighties, but gold had losses. So, it’s not a perfect correlation. And the problem is for investors is that we don’t need to just keep pace with inflation.[00:18:25] We need to outpace inflation. These clients may be right. A year from now, we may look back and say, darn we should have put everything in gold—gold bricks. But there’s no real way of knowing that.
Our strategies right now do have some exposure to gold, commodities, real estate and things like that. But you want to make sure you’re diversified. And really the more important thing is to make sure that you have a [00:19:00] strategy–a really good rules-based strategy. And that’s what we can provide.
Darren: Yes and there’s one very interesting thing that we’ve been thinking about, and that is–what about money in the bank? Financial planners recommend that you keep three to six months of savings in a bank account. But banks aren’t paying anything. So, if you have 30k in a checking account and inflation is 8%, you’re basically losing 8% a year. That’s not fun. But we have a potential solution for this.
Travis: We do. Yeah. So this was something I created because personally I just had this money sitting in my bank account to pay taxes and for my emergency fund. Actually, it came from our dad, Richard. He brought us in the business, but [00:20:00] he would use high yield bonds. So that was like his bank strategy. Okay. Now that may not be best because high yield bonds correlate with the stock market a lot, but I had a similar thought where maybe there’s something better I can do with this money that’s in the bank and set aside for emergencies and taxes or just reserves.
So, Darren, you helped put it together and we call it our cash management strategy which is designed to have low risk.
Darren: Yeah. So we designed that to [00:21:00] have the least amount of possible draw down. It’s not a very aggressive strategy, but historically it’s done fairly well, at least better than just a static bank account. Now it’s not without volatility. It still can have some volatility. That’s the thing you have to be aware of. So this is a kind of strategy to use with those funds that you don’t expect to use. Emergency funds would be a good thing for it. I do get asked this question, you know, should I invest my emergency funds?
Because people do have this concern about losing money because of inflation in their emergency reserves, but this strategy it’s a tactical strategy. So it changes with the stock market and with things.
So it’s not as if you just take your emergency fund [00:22:00] and put it all in, you know, a growth fund and then the stock market plummets. And then, you know, you need this money and it’s not there. It’s super important to have some sort of risk managed strategy.
Travis: And I didn’t know you could have a checkbook linked to an investment account. I found that out a couple of years ago and it makes it very accessible. You can obviously also just transfer money to your bank account, but I find that a lot of people don’t realize that you can have an investment account that is accessible. I think a lot of people think that when its invested its locked away or something.
Darren: And you have a great term for it. I think you call it the brokerage check account?
Travis: Yes, it’s a brokerage account with checkbook capabilities. That is what I use for my quarterly taxes. And when tax time comes around I can write checks out of it and use it for emergencies.
Darren: Yeah. A lot of self-employed people have to pay quarterly taxes. I have clients, a lot of attorneys in that boat. And so they use the cash management strategy exactly for that. Now, you know, again, this strategy doesn’t make money all the time. It does have some volatility to it, but its better for clients who are willing to take that risk to hopefully do better over time.
Travis: So I wanted to make one comment, you know, we were talking about before, which was, you know, what, what can you buy or what can you invest in to [00:24:00] combat inflation? And I think that the whole conversation is thought about maybe in the wrong way.
And the reason I say that is okay, inflation is 8% this year. Have you had any clients call you and say, hey I need you to raise my monthly income by 8% because inflation’s that much. Has anybody told you that?
Darren: No, not that I can think of.
Travis: So, really your income needs may not change that much. And we didn’t talk about this, but what’s more important is that over a long period of time, you are consistently making more than inflation. It could be if you’re young and just saving money, or if you’re retired and creating an income for yourself.
Darren: Great thoughts. Well, thanks Travis for [00:25:00] joining us today. This has been a great discussion on inflation and hopefully things start to cool down. But we’ll see what happens. And Patrice, I’m going to hand it back to you.
Patrice: Well, I’m going to come right back at you and say, Darren, how can listeners reach you?
Darren: Absolutely. Yeah. So, if this is a concern for you, you want someone to talk with, you can definitely reach out to us. The best way is just to go to the website. And at the bottom of the page, you can find a link to my calendar, to Travis’s calendar, and you can set up a phone call or a meeting of any kind.
Patrice: All right, then this is the Lawyer Millionaire Podcast. Follow, share, oh and get the book by the same name. Darren, it should be up pretty soon?
Darren: That’s right, coming out hopefully sometime around the end of June. I don’t have a definite date yet, but its coming.
Patrice: All right. That is The Lawyer [00:26:00] Millionaire. I’m Patrice Sikora. And let’s talk again later.
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