Inflation: The Inevitable, Imminent Threat to Your Wallet (And Your Dreams.)
Inflation can be presented as a fancy economic term that is only understood by experts, but in its simplest form, it is something that affects everyone. In its simplest form, inflation is the rate of increase in the prices of goods and services, thus a decline in the purchasing power of money. You can think of inflation as a thief that comes at you quietly to steal from you. The Consumer Price Index (CPI) is a standard indicator that measures changes in the prices of selected goods and services. As you plan for your financial future and as you seek to protect the fruits of your hard work, it is important to know about inflation.
## The effects of Inflation on Your Wallet: How It Reduces Your Standard Purchase
Inflation can really hurt your wallet. As the prices of the items that you use on a day-to-day increase, the value of your money declines. For instance, assuming that the inflation rate is 2%, that $100 item you have your eyes on today will cost $102 a year from now. It may not seem like much, but it can add up and really hurt your savings over time. Inflation can be especially painful for those who have a set income, such as retirees. As costs rise, their standard of living declines, making it challenging to cover the cost of living. Even people with fluctuating incomes, including freelancers or people who work on commission, will suffer if their income does not keep up with the rising prices.
## Inflation and Your Dreams: How It Effects Your Long Term Financial Goals
You shouldn’t worry about inflation only today, but also tomorrow, especially if you are planning for the future, for example, for retirement or buying a house. For instance, if you are saving for retirement, and inflation remains on the rise, then the purchasing power of your savings will be eroded, thus putting your nest egg in danger. The same way applies for saving for a home. If prices continue to rise due to inflation, it may take more time to save up for that down payment. We cannot also rule out investments! If the returns on your investments fail to beat inflation, then you may actually lose money.
