An article from the US Money reserve reports that inflation is on the rise and it is going to have a huge effect on how we spend our money and how much we have left to save.
We’ve all heard our parents talk about Inflation, but what exactly is it and should we be concerned? Inflation is defined as a general increase in prices and fall in the purchasing value of money. Essentially this means that what cost you $2 last year will cost about $2.42 this year. It’s not much when you think of it in terms of a few cents increase but multiply that by everything you would purchase in a year.
For instance, let’s say you typically spend $200 a month on groceries for you and your family. Over the course of a year, you would have sent $2,400. At the current rate of inflation which is 2.1% next year, you could be paying $2,450 for those same groceries. That’s an extra $450 which is easily a car payment, a credit card bill or a down payment on the family vacation. Over the course of 10 years, that’s thousands of dollars that could be going into your retirement account or that could be used to improve your standard of living!
No matter where you are in your financial journey, it’s a good idea to keep an eye on inflation and one of the ways we measure it is with the Consumer Price Index (CPI). The CPI tracks the prices of the things we purchase the most and reports the changes in prices over time.
Monitoring inflation becomes important as you plan big changes. If you are thinking of asking for a raise or changing jobs you want to consider the rates of inflation and what effect they will have on your income. Knowing that the cost of goods and service will go up 2.1% every year makes that obligatory 2% raise at work a bit useless. That’s what folks mean when they say their salary is barely keeping pace with the inflation. Inflation may affect how you feel about family planning. Knowing how expensive goods and services are and will become could affect how many children you’d like to have, where you are able to live, and where you can send your children to school.
Here are some other ways high inflation rates can hurt you:
- Less Buying Power – I mentioned above how your money doesn’t go as far. You’ll be paying the same amount but getting much less for it.
- Fewer Savings – Paying more for everyday items means less money for savings.
- Higher Interest Rates –Inflation affects everything from credit cards to car loans to mortgage interest rates!
So how do protect ourselves against inflation? The best way to fight inflation is to live below your means and use a few money-saving tactics such as:
- Growing some of your own food with a garden
- Asking for a larger raise at work
- Couponing and buying in bulk
- Driving a smaller car or becoming a 1-car household
Learn more about inflation from the US Money Reserve at https://www.usmoneyreserve.com.