Inflation is not something new to most of us. It is a term we often hear and read in the news. Still, many people do not really understand it.
The question you want to ask are: how can you lessen inflation’s negative impact in your life and on your future? Before we delve into how you can survive inflation, let us first take a look at inflation and its effects in general and in our personal lives.
Inflation is the increase in the prices of goods and services which lessens the purchasing power of money. This results in a higher cost of living. The value of our money in the past is not as much as its value today. Everything is affected by it, including the prices of food, services, gas, and it may even affect your savings for your retirement.
But the easiest to understand, perhaps, is connected to the theory of supply and demand. If the supply of a certain commodity is limited, but the demand for it is high then, naturally, its price will go up. The impact of limited supply of commodities or services can be direct or indirect. An example of a direct impact would be that there is a big demand for vegetables, but its supply is limited because of typhoons or any natural calamity. As a result, its price will surely go up.
An example of an indirect impact is the increase of gas prices. A huge increase in the price of gas will also increase the prices of many commodities since their transportation and production costs will also increase. This effect holds true even to other basic commodities.
Here are other examples of things affected by inflation.
Interest rates: Another thing affected by inflation is interest rates. If you have a savings account with an interest rate that is lower than the inflation rate then you are actually losing the value of your money while it is in the bank. The same is true for cd rates. Even if you see your bank account balance going up, with prices going up faster, you can still buy much less with that amount.
Real Estate: During the time of inflation, buying real estate is advisable since many people are forced to sell their homes at a lower price. But it is the opposite for sellers. They can see losses during this time since they will have to settle for a lower market value.
Though most impacts of inflation are negative, it is not a dire situation that no one can survive. Here are some tips to help you survive it:
Inflation has become a part of our daily lives. It is an inevitable part of the country’s economy. Though we cannot prevent it from happening, we can surely survive it.
Author Bio: YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.