Almost a whole generation has not experienced inflation!
If you have come into your own – working and shopping on your own income – since 2005, you have no feel for what inflation can do to your present and future. The US inflation rate in January of this year was 1.3% and and averaged 2.1% in 2012. Now, this low rate is good and bad.
- Good because it means that the dollar you had at the start of January was worth $.987 at the end. It also means a lot of your assets and belongings have not lost their value,so you can still get a deal on a home mortgage or a car loan.
- Bad because your money is not earning much in your savings account. It also means that unemployment payments, SSDI, and Social Security payments will not increase because they are adjusted for inflation.
In 1980, for example, high inflation rates pushed interest rates over 13.5%. That changed the lives of almost everyone. Young couples could not buy houses. Parents could not send their children to college. A $50K salary was suddenly reduced to $37K without any notice.
Inflation means today’s dollar is not tomorrow’s dollar?
The only thing certain is that inflation will almost always be there. If it goes too far down, there is deflation and that hurts the economy badly. Some economists feel an average rate of 2% is a healthy thing for the economy.
Regardless, you need to be positioned to benefit from inflation or prepare for it. There is a little math involved, but if you know how much money you will need to retire the way you want, then, you can compute how much you need to put away at the inflation rate to make that work. Or, you can take a number now and calculate how much that money will produce for you.
- If you purchased an item for $10,000 in 2000, the same item would cost you $13,372 today.
- If you want $100,000 in 30 years at the low rates of interest being paid today, you need $55,207 today.
- And, if you are to have the $500,000 it will take you to retire at a moderate-to-low lifestyle 30 years from now, you need $276,035.
This can be pretty discouraging, but there are resources and advice that can help you achieve your short and long-term goals. But, nothing benefits from delay!
Robin Williams is an Executive at CashOne, a leading provider of online payday loans and instant payday loans. Serving the entire United States, CashOne is a preferred partner to help people get through their short-term financial crunches through fast approval and simple terms and conditions. Google +