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Now that the kitchen is *finally* nearing completion, we have a few things to consider once the office is done too. We have injected quite a bit of capital into this place and this means that (hopefully) the evaluation of the property has increased accordingly, maybe even more so, since there has been the affects of the pandemic between and all costs have increased, including that of building and renovating homes. 

![image.png](https://files.peakd.com/file/peakd-hive/tarazkp/23wMYeGpLwyruLZSySxjcKhCVBwoGquS7nX6df5uBBHDvQQPpzQL8NdEefifAVn4bNbbm.png)

For us, we saw that the same products we bought a year ago, have increased in price by up to 70%, which means that the reported inflation rate and the inflation rate we have experienced is *very, very* different. This is something that people need to consider when calculating how affected they are by inflation, as the reported rate is generally based on the consumer price index, but only includes certain ranges of products. This means that there can be dramatic escalation in those that lay outside of the group that can heavily affect our costs of living, but are not reported, giving us a false sense of our position. 

For those who were for example, half way through a renovation like us, the first half and the second half of the job come with extremely different price tags. The costs of all of the little pieces the plumber needs, or the cabling for the electrician, have all increased significantly above the CPI, but go unreported as they don't appear in the consumer basket calculation. This means that the "buying power" is going to also be affected by *what we buy,* and a lot of those things are unrepresented or poorly represented in the consumer basket.

If consuming averagely from only the basket of goods of course, then it is quite representative, but if consuming heavily from narrow segments or highly inflated goods and services that are unrepresented, then it becomes far less accurate. For us who are consuming heavily from building materials that have seen a very sharp increase in prices, it is quite an impact. 

For instance, if we spent 40,000€ on materials and labor for the first half of the renovation and there has been a 50% increase on average on prices, the second half is going to be 60,000 - meaning that the total change in cost value has increased by 25%, which is a major impact on any budget, especially when drawing toward the end of the renovation for us, as finances get tight after scope creep and budget miscalculations. 

>The kitchen is the full 50% more.

Put on top of this that the *normal* home buyer has a mortgage and most have gone uncollared to save a few dollars a month, they are going to also see the increase in mortgage repayments on top. For example, our neighbors were quite surprised that I had insisted on collaring our loan, since it was an additional cost on top, but I had the position that the interest rates are at historic lows and while they might remain static, they are more likely to increase than not. The same neighbor bought a summer house a year and a half ago and chose not to collar their loan, and now they are quite concerned with what is going to happen in the future if interest rates keep increasing, as they have both a home loan and the cottage loan to cover. At the time, both were well within their means, but *our means can change rapidly.* 

Financial stress is the norm for most people these days, as even though they might be okay otherwise, it is always weighing in the back of the mind that things can change quickly, as they have done. Most of us who are under 50, haven't experienced having to deal with financial conditions such as these directly, so it is new territory and while we might have imagined how we would manage, the reality could be quite different. It is very much like the quote by Mike Tyson;

>“Everyone has a plan until they get punched in the mouth.”

Right now, a lot of people are getting punched heavily for the first time and there is more pain to come. This puts pressure on all systems and it is likely going to take a toll on other aspects of life, from our employment motivation and behavior, to our family life and physical health. For some I have talked to, they are already mentioning that at times they feel that they "can't breathe" when they think too much about it, so avoid thinking about it, instead turning to distractions to take their mind away.


In my opinion, this might be a good "from time to time" strategy, but overall, it is something that is more *head in the sand* and will lead to even more pain, as conditions aren't dealt with, leaving them to degrade further, setting up a downward spiral.

Personally, I think I spend too much time thinking about it, but not enough time acting to improve it, meaning that I should be changing my own behaviors more in order to better cope. I feel that I am not the only one doing this, but I also think that it is hard to admit for most of us, because it is a failure to do what we know we should. It is like telling people we are on a diet and eating healthy, but we have a secret drawer full of candy bars we reward ourselves with, whenever we eat a salad.

But, here we are and it is *never too late* to act, *until it is.* What is too late is less the question than what actions need to be undertaken and in my family, it is going to be a reduction in expenditures and more of a focus on retaining income, investing where we can. This is hampered by the blowouts in costs of renovation with a couple of unforeseen expenses being significantly more than we budgeted for, but we *should* be able to cover it and then start building again, albeit with some discomfort. 

My wife said last night;

>"It sucks to be worrying about money again!"

And all I could reply was, *I have never stopped.* 

For me, it is always on my mind, due to my own background and scarcity mindset it developed, but it has been nice to not have to worry about the cost of groceries for the last few years, even though we have been renovating heavily. In order to be in this position though, it is has been a very work-heavy process on my end. However, now we are in this between period with associated costs still incoming and the costs of everything else increasing too, so there is that sense that the increasing costs of living, but there really is very little chance of me doing more work, so the only way is to increase the value of the work I do. 

>Not an easy task. 

But, unlike the past times I have been in similar situations, I have at least some kind of future lifeline, meaning that as long as I can survive and keep investments intact, things will be okay. It might be another two or three years, perhaps even five, but eventually, financial life will improve. 

The real challenge during these times isn't the financial issues themselves, but the impacts they have on other aspects of our life, like our mental health and the quality of our relationships with family and friends. In my opinion, if we are able to keep these things solid and healthy, the impact of hardships is greatly lessened, meaning that we are better able to deal with what the economy throws our way. And when we pull out the other side, we do so with the people we care about the most.

And I think that is what a healthy economy is, one that enables better relationships and stronger bonds throughout society. *The economy we have is very ill.*


Taraz
[ Gen1: Hive ]


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