👋 Hey there, welcome to the WalletBurst monthly newsletter for the month of August. Let’s dive in!
Around the web
⏰ Are you spending your time on the right things? Julian Shapiro wrote this incredible guide to using your own Personal Values framework to help you answer this question and decide what to do with your life. The Personal Values exercise Julian breaks down is simple and takes about an hour: you start by listing all the values that you care about, like Knowledge, Adventure, Money, and Human Connection to name a few. Then you rank these values by importance, and finally compare how each of the paths you are considering satisfies each of your values. I went through this Personal Values exercise before starting WalletBurst, and it made me realize that creating online personal finance content best aligned with my values over the long-term.
🛑 For my younger readers in particular, Nick Maggiulli wrote a great piece titled Go Big, Then Stop about what is perhaps the most effective wealth-building strategy for those starting young. Nick’s Go Big, Then Stop strategy entails saving as much money as you can as early in life as you can, which then allows you to ease off saving later in life and let compounding growth do the heavily lifting of building your wealth. Go Big, Then Stop is basically Coast FIRE described a slightly different way. Nick compares some interesting scenarios in his article, and the key takeaway is that due to the extra time for compounding, money saved in your 20’s is worth 2x money saved in your 30’s, and worth 5x money saved in your 40’s, which is crazy to think about ????.
🖨 The Cantillon Effect. This month I learned about a new term called the Cantillon Effect, coined by 18th century French philosopher Richard Cantillon, which is the observation that the effects of money printing by the state are unequally distributed and based on the institutional layout of the state’s financial system. While federal money-printing during the pandemic was intended to help individuals and small businesses, due to the way that money travels in our financial system, Wall Street has benefitted the most from the expansion of the money supply. How can you use the Cantillon Effect to your advantage? The answer is to own assets like stocks and real estate which benefit from low interest rates. To learn more, I recommend Matt Stoller’s article titled The Cantillon Effect: Why Wall Street Gets a Bailout and You Don’t.
🧻 Beware of Shrinkflation. After experiencing relatively low consumer price inflation from 2010 to 2020, we are now entering a time of soaring inflation, with the government-measured CPI standing at an all time high of 5.4% in summer 2021. While you may be seeing inflation in the form of high prices for everything from gas to groceries and real estate, inflation also manifests in another way, called shrinkflation. Shrinkflation, or downsizing, is where instead of increasing the price of a good, a producer will reduce the amount of the good while keeping the price the same. I came across a fascinating subreddit called r/shrinkflation which is full of examples of shrinkflation in action. Think about the last time you had a Reece’s cup, didn’t it seem a lot smaller than you remember? I predict we will be seeing a lot more shrinkflation in the future as producers have to pass higher inputs costs down to consumers without scaring them away with higher prices.
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End Note
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Have a great day,
Andrew ✌️
