OD #17 - Inflation Is Destroying the Middle Class (Unless You Do This)

Inflation isn’t just making groceries more expensive — it’s quietly reshaping the middle class.

While wages struggle to keep up, assets continue to rise. The gap between those who own and those who wait is widening.

In this episode, we break down what’s really happening behind the rising cost of living, why inflation acts as a wealth transfer, and the strategic mindset shift required if you want to get into the housing market during uncertain times.

This isn’t about panic.
 It’s about positioning.

If you’re feeling stuck, squeezed, or unsure whether now is the right time to move — this conversation is for you.

Chapters

• 0:00 Why Life Feels More Expensive
• 0:46 Disclaimer And Setup
• 1:12 Inflation’s Shock And What It Means
• 2:45 Asset Owners Versus Cash Holders
• 4:16 The Trap Of Waiting
• 6:00 Australia’s Housing Supply Crunch
• 7:05 Rates Are Cycles, Property Is Long
• 8:00 Income Expansion Beats Frugality
• 9:10 Co‑Buying And Borrowing Capacity
• 9:50 Compounding And The Cost Of Delay
• 10:30 From Fear To Strategy
• 11:25 Entry Strategy And Cash Flow Safety
• 12:10 Choose Leverage Over Comfort
• 12:46 Closing And How To Engage

Transcript

Why Life Feels More Expensive

Oscar Don 0:00

Let me start with a simple question. Why does it feel like you're running but standing still? You're working, you're earning, you're trying to save money, but every month feels tighter. Groceries are up, fuel is up, insurance is up, rent is definitely up. And if you're trying to buy your first home, it feels like the goalpost keeps moving. Today we're going to break this down properly, not emotionally, not politically, not reactively, but strategically. Because rising cost of living isn't just pressure. It's a filter. And depending on how you respond, it either shrinks your future or builds it.

SPEAKER_00 0:46

Welcome back to another episode of the Finance Bible Podcast. Zeke here and your co-host Oscar. But before we get into it, please note that nothing in this podcast should ever be speaking to personal financial advisors. Cool. If that is what you are speaking, reach out, we'll get you in touch with the correct professional and get the job done properly. Sit back, relax, and enjoy the show. Let's get into it.

Asset Owners Versus Cash Holders

The Trap Of Waiting

Australia’s Housing Supply Crunch

Rates Are Cycles, Property Is Long

Income Expansion Beats Frugality

Co‑Buying And Borrowing Capacity

Compounding And The Cost Of Delay

From Fear To Strategy

Entry Strategy And Cash Flow Safety

Choose Leverage Over Comfort

Oscar Don 1:12

Welcome back to another episode of the Finance Bible Podcast. Today, as you just heard, we're talking about the rising cost of living and why this is still a wealth-building era despite how expensive groceries fuel insurance is becoming, because there's still a way. So let's just let's ground this in reality straight away. Look, Australia saw inflation peak at around 7.8% in late 2022. So that is the highest in over three decades. So for example, that means if you had 100 grand sitting in cash, earning little to no return, its purchasing power effectively shrank dramatically over a short period. We've talked about that all the time. That cash money in your bank account doesn't really do much. You actually lose money due to inflation. So while that was happening, you had rents across many capital cities rising over 20% since 2020. Construction costs have increased more than 30% between 2020 and 2024. And you've got interest rates went from 0.1% to above 4% in just over a year. So that was one of the fastest increases in modern history. Now, here's the part most people miss. Inflation doesn't only increase what you pay, but it increases what it costs to actually replace assets. So for example, if it costs more to build, if it costs more to develop land, if labor costs more, then existing property becomes more valuable over time because replacement cost rises. So unfortunately, that's what happens. That's structural and actually not speculative. So there you go. I guess what we're wanting to look at is is inflation a wealth divider? I think it is. So let's talk about something uncomfortable. So in my opinion, inflation definitely divides people. You've got asset holders versus cash holders, homeowners versus renters. So the average homeowner in Australia has significantly higher net worth than the average renter, unless the renter is a rent vestor. That's a completely different situation. But the reason is it's not because they're geniuses, but because they own something that appreciates and compounds. And that's why we love property. So when inflation rises, generally you'll see rents increase. You'll see wages lag behind. We spoke about wages in our episode last week, the multiple multiplier from 1980 to now, crazy. And also when inflation rises, your costs also expand. So property owners experience rising rental income and rising asset values over time. So, and on the other hand, inflation punishes savings because you're technically losing money if your money is just in your bank account, and it rewards scarcity assets. So the question is, and the most important question is which side are you positioning yourself on? That is something you should ask yourself. Because if you're on the rental side, your and your money's in your bank account, it's really not going to do much for you. So, how can you get to the other side and be a part of the increased prices of rents, capital growth, et cetera? So the psychological trap of the classic I'll wait, and you've got many people who are saying, look, I'm just gonna wait for the market to crash, I'm gonna wait for interest rates to drop, I'm gonna wait for this, this, this, you know, 5, 10, 15, 20 years later, you're still waiting. So people say you've got to time the market, but realistically, if you're purchasing in a A-grade area which over time has all the drivers, everything ticks the boxes, just you just got to get in the market and just get in there because exposure over time will outweigh timing the market. So that is where people get stuck, the I wait mindset. But let's zoom out. Since the early 1990s, Australian property values nationally have increased over 400%. So that's through recessions, through the GFC, through COVID, through mining crashes, through rate hikes. There has never been a smooth runway and only disciplined entry points. And here's the dangerous part of waiting. The longer you delay, the more inflation compounds against you. The cost of entry doesn't stay still while you hesitate. So I've got clients and friends who I know who've been waiting for five years, and now they are in a position where their deposit that they had ready for five years ago, which they could have afforded a good property, now they don't have enough because what's happened is A, inflation has eroded their savings, and B, the price of property and the entry level that they're wanting to purchase has increased dramatically. So even if they wanted to purchase that property still, they're priced out. They have to continue to save even more and work longer hours and even get a higher salary job just to cover the deposit which they initially had. That is the price of waiting. The bigger conversation though is the supply crisis. Uh, it's a conversation not enough people are having, but Australia has a housing supply issue. So migration has surged post-COVID, as we spoke about in our last episode. Population growth has accelerated, building approvals are lower than pre-2020 levels, and builders have collapsed due to cost blobouts. You see it on the news probably at least once a month that a builder has gone under. But at the same time, we have infrastructure spending has increased, urban sprawl expanding, demand staying elevated. So when demand outpaces supply, that's where long-term pressure on housing remains upward. That doesn't mean that prices will skyrocket overnight. It means that the structural under supply supports long-term growth. So if you understand supply and demand, you will understand property. It's as simple as that, really. You just got to figure out where these areas are. And that's where you speak to a team who can tell you and guide you where these areas are. So we recently had an interest rate hike at the start of this month, and everyone is complaining about the interest rates really impacting them and thinking it's RPA's fault, the interest rates' fault, that they're not in the market. But interest rates aren't the enemy. Yes, obviously rates increases hurt if you're in the housing market or you're trying to get in and you're right on the edge and it increases the rate, and then you can't get in. So yes, it hurts. Yes, borrowing is more expensive, but historically the rates today are not extreme. Early 2000s, mortgage rates were above 7%. In the 90s, even higher. You're talking 10, 12, 14%. Obviously, times have changed and everything's a lot more expensive, but still, it was a lot higher than it was. And the main point I'm trying to say is yet property still compounded over decades. So what matters isn't today's rate. It what matters is did you buy within your means? Did you build in buffers? Are you holding long terms? But rate cycles are temporary, but property cycles are long. And the main power lever is the income conversation. So this is where a lot of people avoid talking about. It's you can only cut so much out of your life. You know, you might want to cancel Netflix, stop Uber Eats, skip holidays, but you can't shrink your way into wealth. So wage growth has hovered around generally three to four percent annually in recent years. So if inflation runs hotter than that, you technically feel squeezed. So the real lever becomes income expansion. How can you increase your income? How can you upskill? Are you good at negotiating career mobility, side income? Do you want to build a business and be entrepreneurial? So the housing market isn't just about deposits, it's about income velocity. So increasing your earning capacity and then your borrowing capacity follows. So if you're a couple and you're both on good incomes, that's great. If you're single and you're struggling and you technically need another borrower to go into the property with you, you may want to look at a friend, a family member, or someone who you trust who is in the same boat. If you guys merge together, then your borrowing capacity drastically increases and then you can get into the property market earlier than you normally would. I've got many friends and clients who've actually done this in the past to get into their first property. They bought a property with not their partner, not their brother, but a friend. It's becoming more and more popular these days, which is a new way of kind of getting into the market. So then we'll talk about the compounding effect. So let's play a long game. If property grows at even a conservative 5-6% annually, a 500k asset becomes over 1.2 mil in 15 years. That is compounding. Now think about the rent. If rent rises 4 to 6% annually, over 15 years you pay significantly more with nothing to show at the end. Renting isn't wrong, but long-term renting during inflation means absorbing increasing costs without owning the appreciating asset. So assets compound, rent compounds, but all as well as that delay compounds. So the next point is scarcity thinking versus strategic thinking. Rising cost of living creates fear. Fear creates short-term decisions, and short-term decisions destroy long-term compounding. So if you're a scarcity thinker, that type of thinking is let's protect, retreat, and wait. If you're strategic, you're thinking, let's assess, plan, and position ourselves. So the wealth builders are not fearless. They are just calculated. They understand discomfort is part of the process. Now, if you want to enter the housing market now, the conversation shifts from emotional to mathematical. Not what do I love, but how can I make this make sense long term? So the conversations to have with yourself and your partner or your friend is can I buy below replacement costs? Is supply constrained? Is infrastructure expanding? Is demand steady? Can I realistically hold this asset for the next 10 to 15 years? If the if the answer is a yes to majority of them, that is good. That's what you kind of want to see. And entry-level strategy beats dream home strategy. And look, let's be honest, cash flow safety beats ego. But the real question is, and a deeper way of you to think about this episode towards the end of it is do you want comfort today or do you want leverage tomorrow? Because the cost of living will continue to rise. And that's just the reality of the economy at the moment, unfortunately. So the difference is whether you remain on the consumption side with continuing to spend on going out, drinking, eating food, socializing, spending all your money on Uber Eats, all these subscriptions, or step into accumulation. So how can we get into the property and the property market and leverage into your next one over the next 5, 10, 15 years? So the housing market isn't about chasing hype, it's just about positioning yourself during uncertainty. But yes, life at the moment feels expensive. Everyone's feeling it. I'm even feeling it as well. The pressure is real. Inflation doesn't ask permission, but it either compounds against you or compounds for you. And I tell you what, you want to be, and I want to be as well, on the compounding for you side. Because if inflation's on your side, happy days, you'll be set up perfectly and you will benefit from it. But you need to think long term, you need to look at ways how can we increase our income, how can we buy intelligently, and how can we hold patiently over the years, because that's where true wealth comes. And let the and let time do the heavy lifting for you. That is what compound interest is all about. So if you have any questions about this episode, drop them in the comments or respond to us on Instagram. But that is all for today. Just a short, sharp episode about the rising cost of living and basically gives you a bit of an idea of how you can look at combating it. But until next time, ciao.

Closing And How To Engage

SPEAKER_00 12:38

We hope you enjoyed the episode as always. You know exactly what to do. Hit that follow button, subscribe, whatever platform you listen to this podcast on. Also share it to friends, family, co workers, whoever you think may benefit from.