The Frog and the Pot of Boiling Water

Financial Advisor, Wealth Management,
Posted by Matthew Grishman
· 7 September, 2022

Did you know that if you drop a frog in a pot of boiling water, they will instinctually and immediately jump out and escape certain death? But did you also know that if you take a pot of cold water, place the frog in the water, and slowly heat the water, the frog will just sit there and boil itself to death?

This is a common story that’s been told for years. Some argue it’s a myth. I’ve never been heartless enough to try the experiment myself, so for the purpose of my blog today, let’s assume the story is true.

It’s 113 degrees outside here in the greater Sacramento metroplex. Yesterday was 114. Tomorrow and the next day are forecasted to be around the same. All sorts of September heat records are being broken up and down the state of California today.

If this is your first summer living in the heat infested parts of California, which is the part of the state that doesn’t touch the Pacific Ocean (aka MOST of California), then you’re probably feeling like a frog who just jumped into a pot of boiling water. If you’re operating out of sheer instinct, you may already be planning your escape back where you came from.
But if you’re like me and you’ve been living here for 20+ years, you might feel more like the frog who’s been sitting in comfortable water for a while and we’re beginning to notice the water’s now boiling.

Hmm. What to do now?

Much like the frog being boiled to death, my wife and I often talk about leaving this crazy heat, especially as it appears to be getting worse and worse. But where do we go? My young adult children live here. My business is here. Most of my friends live here. And I love (most of) the 320 days a year of sunshine. Maybe if we sit still indecisively long enough, we’ll just wind up boiling ourselves to our demise without even knowing it.

The same can be said about another aspect of Northern California life now …


Inflation has been in the headlines now for most of 2022. It’s the hot topic in the news, and much like the experience of our friend, the Frog, it has caused this nice tepid economic pot of water we’ve all been sitting in, to start boiling. The question is, will we stay put or jump out?

If you are new to money, or being responsible for money for the first time in your life (ex. young adult graduating from school, receiving an inheritance, recently divorced, etc.), then you must feel like the Frog who just touched boiling water and you want to hop out.

But the truth is, inflation has always been here. Inflation is not a new concept. It just hasn’t boiled like this in nearly 40 years. When most people think of RISK as it relates to money, they often think about the gyrations of the stock, bond, crypto and real estate markets – and how these gyrations can cause us to lose a lot of sleep worrying about losing money.

Yes, bear markets can be quite painful. But inflation is the real dragon I’ve been trying to slay for 27 years as a financial professional.

First, let’s define inflation. Inflation is simply the erosion of your purchasing power. It means that $1 today will be able to purchase less stuff in the future. Usually this happens so gradually we barely feel it. Sometimes, like now, it comes on hard and fast.

Let’s look at a specific example as to why inflation is the dragon I’ve been trying to slay on behalf of my private clients since the day I showed up.

Imagine that it is 1995 and you are a 65-year-old newly retired human meeting me for the first time. In 1995, we determined that you would need your investment savings to produce $5,000 per month of reliable income for you to live a comfortable retirement.

Fast forward 27 years to current time. You’re now 92 years old. How much income do you suppose you would now need your investments to be creating, just so you can afford the SAME lifestyle you chose when you retired in 1995?

You would need $12,200 per month today, just to maintain your current retirement lifestyle. That math assumes a long-term inflation factor of just under 3% per year. Let’s hope I did my job and helped you position your retirement savings in a way that this could have been accomplished.

That’s nearly 2.5 times the amount you needed then, just to maintain the same lifestyle today. Is it possible that your lifestyle may have changed these past 27 years? Could the later years of retirement with the costs of healthcare and long-term care, wind up being even more expensive than you could have imagined when you were 65?

Inflation has always been here. It’s not going away. As crazy as it sounds, I’m grateful for our most recent spike in inflation because it’s put inflation back on the map. As painful as it is personally to be feeling it at the gas pumps, at the grocery store, and pretty much everywhere else money touches my life, I’m grateful we get to talk about it again while people are willing to listen.

Of all the risks you face with your money, inflation is by far the number one financial risk you will face over the course of your lifetime. If the best time to plan and prepare for it was 27 years ago, the next best time is right now.

Stay connected with us – Jim and I have a lot more to say when it comes to battling inflation today, as well as some long-term planning considerations for how to combat this (normally silent) money killer over long periods of time.

Check out Episode 79 of our podcast to hear more about this very timely and timeless concept called INFLATION!

Matthew Grishman
Author, Speaker, Co-Host & Recovering Spendaholic

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