61

Why? Because the two are unrelated. "Inflation rate" is calculated by measuring changes in the consumer price index (CPI). Your personal consumption may not match the CPI and the inflation you experience is likely quite different than what the CPI indicates. A great example of this is "rents". If rents increase, but you own your own home, does that ...


40

Many news outlets ... are reporting that the current US stock sell-off is due to a stronger-than-expected jobs report in January... Had the market done well in the last few days those same people would have claimed it was due to the stronger than expected jobs report, and in fact oftentimes a strong jobs report does lead to a bump in the market. Furhtermore,...


33

Inflation as defined in the general, has many impacts at a personal level. For example, you say that the reduction in the price of oil has no impact on you. That's absolutely not true, unless you're a hermit living off of the land. Every box or can or jar of food you buy off the shelf of the grocery store has the price of oil baked into it, because it had ...


33

Let's say there's a product worth $10 in July and the inflation rate in August is 10%. Will it then cost $11 in August? Yes. That's basically what inflation means. However. The "monthly" inflation numbers you typically see are generally a year over year inflation rate on that month. Meaning August 2017 inflation is 10% that means inflation was 10% since ...


27

You keep money in a savings account so that you know you can access it at any point, and that it will always be there. It is diversification of risk. If you have the money in equities instead, you can access it relatively quickly in this day and age, but it may not be there when you need it. The common example is losing your job during a recession. If ...


27

It's mostly semantics. Per https://en.wikipedia.org/wiki/Talk%3AInflation_tax#:~:text=An%20inflation%20tax%20is%20the,that%20subtracts%20value%20from%20currency. An inflation tax is the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of inflation, which acts as a hidden tax that ...


24

Your comment about quality of living is the answer to your own question. In general, it's best to live in as small a house as one can be comfortable. You offer no other real details beyond $1,000/mo disposable income. Is that after depositing 15% to your retirement accounts, and having a fully funded emergency fund? Is it truly extra, or does it get ...


21

First, from The Inflation Calculator - What cost $24,000 in 1971 would cost $141,898.11 in 2015. But. In 1970, mortgage rates were 8.5% vs 3.5% today. The payment on $24K (let me just do the math on 100% of price) was $185, which 'inflates' to $1141, but $180K at 3.5% is just $808. This is my simple way of saying that of all the items we buy, nearly ...


21

If you save x every month, the future value (FV) is where n is the number of months r is the monthly rate of return So if Y% return is 10% nominal interest compounded monthly r = 0.10/12 For example, over 3 months, saving $100 per month n = 3 x = 100 FV = (x (1 + r) ((1 + r)^n - 1))/r = 305.03 Checking the balance at the end of each month long-hand ...


20

To answer your specific question about income, the answer is: about $20,000 (or a little less) in yearly income put you in the top 10% of income earners in the United States in 1970. This information is provided by this US Census Document (PDF page 13, labeled as page 11, table 1, document entitled "Household Money Income in 1975 and Selected Social and ...


17

First, I advise against attributing stock market movements to particular pieces of news. Many cable shows depend on your interest in this question, but unless the news is nuclear war, its long-term effect is generally exaggerated on the day that it takes place. And the jobs report really wasn't so out-of-line, and other similar reports over the last several ...


17

It IS going to the government. What causes inflation is when the government increase the money supply faster than the economy is growing. Imagine a simpler monetary system with no fractional reserve banking and no electronic money. All money is paper bills. The government prints the paper bills, and then uses this paper money to buy things, thus inserting ...


16

Your $100 at t=0 will be worth $55.2 thirty years hence. Something that costs $100 today will cost 100*(1.02)^30 = $181 30 years later. So your original $100 can purchase only 100/181 worth of goods that it could purchase at t=0. So its value after 30 years is $100 * 100/181 = $55 in t=0 dollars. So it will have lost 45% of its value in 30 years.


15

Inflation is basically this: Over time, prices go up! I will now address the 3 points you have listed. Suppose over a period of 10 years, prices have doubled. Now suppose 10 years ago I earned $100 and bought a nice pair of shoes. Now today because prices have doubled I would have to earn $200 in order to afford the same pair of shoes. Thus if I want ...


15

Other things to consider: Bigger house generally leads to higher costs besides the purchase price. Utilities will be higher, general repairs will be higher, Taxes (I assume you figured them in, but still worth mentioning) will also be higher. Does the commute change between the properties ? Cost/time increase in commute (or ideally decrease) can ...


14

As pointe out by @quid, inflation figures are almost always quoted as a comparison of prices last month, and prices a year ago last month. So 10% inflation in August means that things cost 10% more than they did in August a year ago. This can lead to some perverse conclusions. Consider an imaginary economy where prices stay constant over years. ...


13

The rates can't just be subtracted. You have to discount each future payment for inflation to find the total inflation-adjusted cost. First though, the calculator you are using is assuming the input rate is a nominal rate, compounded monthly, not an effective rate. I'll proceed with nominal annual rates. So, using the loan formula to arrive at the figure ...


12

Inflation is good for the economy primarily because it is an incentive to invest. If inflation is occurring, then keeping your holdings in cash is a net loser; 5% inflation means that in a year, your $100 is now worth $95.24 (1/1.05), so unless you're getting really good interest, that's a bad thing. On the other hand, if you invested that $100 in a ...


10

In short, if your expenses rise with inflation but your income does not, your expenses will eventually exceed your income. As the article on perpetuities says, a perpetuity is an annuity that pays forever. An annuity is a financial arrangement whereby you are paid a fixed sum every so often for a period of time. Hence, a perpetuity is an arrangement ...


10

Individual product prices do not necessarily rise at inflation rates. What inflation means is that the purchasing power of one unit of currency decreases by x% in a year, which is typically measured by looking at a broad spectrum of products in an economy and extrapolating to "all products". So for all products across an economy, the aggregate price of all ...


10

Inflation is a macro pressure. It is not experienced at a micro level on a 1 to 1 basis. In a given year a pay raise less than the stated CPI rate, for some people the change will either be a real pay decrease, or make no difference, or be a real pay increase Over a long time if that trend continues, spread over a large number of people, on average, it ...


10

Any store of value has some risk of being outpaced by inflation, as measured by some other asset. For instance, you might invest in property, but find that the cost of a loaf of bread has gone up faster than the value of property. Wherever you put your money, you're therefore weighing up the risks and benefits: The limitations on when you can put money in ...


9

Nine years later, we know that pursuing this strategy is a losing proposition. Using the Base Metal Coin Melt Value Calculation at coinflation.com as you suggested, we see that $10.00 of nickels is now worth $8.00.


9

My guess is that the point is that yields on bonds and cash equivalents is so low that inflation will cause the inflation-adjusted returns to be negative. There is something to be said for how much inflation can eat out of investment returns. At the same time, I would note the occupation of the person making that post along with what biases this person ...


9

The same author wrote in that article “they have a trillion? Really?” But that’s what happens when ten million dollars compounds at 2% over 200 years. Really? 2% compounded over 200 years produces a return of 52.5X, multiply that by 10M and you have $525 million. The author is off by a factor of nearly 2000 fold. Let's skip this minor math error. The ...


9

The average inflation rate in the US over the last 17 years is 2.17% per year (source). So he has $30,000 now. If another 3 years go by and he doesn't invest it in anything whatsoever, he would have 30,000/(1.02173) = $28,128 equivalent buying power 3 years from now. I would not focus on how much money he is losing per year, but instead focus on the ...


9

Saving in a bank account that pays less than the rate of inflation isn't a risk. If inflation is 2%, and you get interest of 1%, then you will lose 1% of value per year. That isn't a risk - you know it's going to happen. Many countries have bank deposit protection schemes. In other countries, the government will step in to make sure that big banks don't ...


8

First, a clarification. No assets are immune to inflation, apart from inflation-indexed securities like TIPS or inflation-indexed gilts (well, if held to maturity, these are at least close). Inflation causes a decline in the future purchasing power of a given dollar1 amount, and it certainly doesn't just affect government bonds, either. Regardless of whether ...


8

Note: that the New Zealand CPI in 2014 Q2 is 1.6% Year on Year, that is it is the inflation rate from 2013 Q2 to 2014 Q2. The quarterly change from 2014 Q1 to 2014 Q2 is 0.3%. Check out this Inflation Calculator. At the same time the Official Interest Rate in New Zealand was just raised on 24th July 2014 by 25 basis points to 3.5%. So your savings in the ...


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