The 1970s Called: Inflation Wasn’t a ‘One-Time Event’ Then Either
Inflation has a funny way of messing with people twice.
First, it hits your budget. Then it hits your beliefs.
Because the hardest part isn’t paying more for groceries or insurance. It’s realizing the world you built your plan aroundlow, stable inflationmight not be the world you’re living in right now.
This isn’t a prediction, and it’s not a fear pitch. It’s a history lesson with a practical takeaway: in the 1970s, inflation didn’t show up as a single spike that politely went away. It showed up in waves, with false dawns in between.
Why the 1970s still matter
Most investors remember the 1970s as high inflation and leave it there. But what made that era so difficult wasn’t just the number. It was the pattern:
Inflation surged
Policymakers responded
Inflation cooled
People relaxed
Inflation came back
That cycle is what breaks good plans. Not because the plan was wrongbut because the plan assumed the problem would be brief.
The real lesson: inflation is a regime, not a headline
A regime is just a fancy word for the rules of the game. In a low-inflation regime, you can get away with sloppy assumptions:
Cash feels pointless
Long duration feels safe
Pricing power doesn’t matter
Set it and forget it works more often
In a higher-inflation regime, the rules change:
Costs rise unevenly (some categories calm down, others don’t)
Wage pressure lags and then catches up
Interest rates become a bigger part of the story
The easyportfolio can feel harder to stick with
The takeaway isn’t panic. It’s update the playbook.
Three ways inflation quietly breaks high earners
1) Lifestyle creep becomes permanent
When your income rises, it’s easy to let fixed costs rise with it. Inflation makes that worse because it normalizes higher monthly burn.
Practical move: Create a fixed cost ceiling. If your fixed costs are creeping up, inflation isn’t the only riskyour own commitments are.
2) Taxes become a bigger drag than you expect
Inflation can push nominal income higher even when real purchasing power isn’t improving. That can increase tax friction and make after-tax outcomes feel worse than the headline numbers.
Practical move: Treat tax planning like a quarterly project, not an annual event. (Most surprises are just timing mistakes.)
3) The portfolio feels wrongmore often
In inflationary periods, different parts of the market take turns being uncomfortable. That creates a temptation to chase what just worked.
Practical move: Decide in advance what you will rebalance into when something is out of favor. If you don’t, your strategy becomes your mood.
A simple Inflation Wavechecklist
If inflation comes in waves (like it did in the 1970s), here are the questions that matter:
What expenses are most exposed? (insurance, housing, education, healthcare)
What income sources are most fragile? (bonus-heavy comp, cyclical business revenue)
Where are you relying on hope instead of a rule? (cash needs, rebalancing, concentrated stock)
What are your must-not-sell assets? (long-term holdings you don’t want to liquidate in stress)
What is your optionality fund? (cash or liquid reserves that prevent forced decisions)
You don’t need to build a bunker. You just need a plan that assumes the problem might last longer than a news cycle.
The calm, modern playbook (no heroics required)
Here’s the version that works for busy founders and executives:
Keep a real cash buffer for known needs (taxes, lifestyle, business opportunities)
Diversify by economic outcome, not by ticker count
Write down rebalancing rules so you don’t outsource decisions to headlines
Stress-test concentration risk (company stock, business equity, local real estate)
Coordinate tax strategy early so inflation doesn’t turn into an after-tax surprise
The goal isn’t to beat inflation. The goal is to keep your plan intact while inflation tries to turn everything into a short-term decision.
