- Inflation is almost always bad for you.
- The danger is huge. Worldwide, important central banks are trying to inflate the money.
- Inflation threatens your income, wealth, savings. Increases debt burdens. Get ready to fight it.
- There are at least 13 ways to defend yourself. Read the list.
How Bad Is Inflation for Your Income, Savings, and Debt?
Inflation is when prices surge in general, on average. With the same amount of money, you can buy fewer products and services in the future than before. Or, to pay the same products or services, you need more money than earlier. It is the depreciation of the currency. Economists say a few percents of inflation is needed for healthy growth and to maintain jobs. But for individuals, like you and me, inflation is almost always bad.
Inflation Threatens Your Income At Least If:
- You have cash in your pocket (we all have). It loses its value slowly. Like by some sort of invisible tax.
- You have money in any bank account or any other investment which has a lower return than the inflation.
- Your wage or other incomes aren’t following the inflation, aren’t surging at the same pace.
- You are in debt. Higher inflation can result in higher interests, which is a disadvantage for you. Monthly loan payments soar.
- Inflation can cause the devaluation of the national currency. That can be an extra burden for you if you want to travel abroad, buy a bigger imported product (like a car). Or, if you have debt in a foreign currency.
- The state is cheating, manipulating the value of inflation. (Happens in dictatorships or extremist-ruled states in the first place.)
- The return of your investments reaches inflation. But your consumption is different than the consumption of the average people. Your expenses increase more than official inflation.
- Finances become chaotic. Especially with a higher, two– or more digits inflation, it gets hard to do any financial planning. Not only for you as an individual, but also for vendors, entrepreneurs, companies.
Why Is Inflation a Huge Threat?
Inflation is almost always bad for the average person. For our incomes, savings, debts, plans, all the future. Inflation is mostly in the interest of governments or central banks. It is more or less happening according to their intent, plans. Some of them recognize it, some not, it isn’t a conspiracy theory. With too much public debt, they can do three things:
- The difficult way is to repay it completely. That happens often cutting expenses and increasing revenues through stronger taxation (austerity).
- Refuse to repay it and report bankruptcy.
- Depreciate it slowly by inflation, negative real interest rates.
The world has accumulated huge mountains of debt, so the risk of more inflation is serious. Read the list of possible defenses.
Unwanted billionaires. Inflated Yugoslav Dinar, 1993 (Source: Wikimedia Commons)
More Important Readings About Your Money
- Which Is Your Best Source of Money? Investing, Saving or Earning?
- Is It A Myth? – The Genuine Truth About Passive Income
- Why Do You Need Ageless Finance? Priceless Lessons of Our Ancestors
I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research, or consult your advisors before making any investment or financial or legal decisions.
(Photos if not indicated otherwise: Pixabay.com)