Inflation is…
Inflation has many forms including many that are self inflicted.
- … upgrading to premium cable
- … buying the latest cell phone each year with a new and more expensive contract
- … signing a luxury car lease every three years
- … purchasing organic groceries on every trip
- … taking that extra long vacation you can’t actually afford
And then there are those you have absolutely no control over.
- … gasoline is approaching $4.00 per gallon
- … grocery prices have increased rapidly
We know what we can control and what we cannot. I don’t look to place blame for rising costs in my life. I seek to control them as best I can.
As a rule, inflation harms the people least able to cope with rising costs the most. A family that has been living paycheck to paycheck will certainly be in more trouble than a family that saves and or invests a healthy amount every month.
It has everything to do with margin. You need a buffer between what is coming in each month and what is going out. During good times, that buffer can be saved and invested for better returns. In bad times, and in times of high inflation, that buffer will shrink. But instead of not being able to pay the bills you will simply have to save less than you would otherwise be able to.
High inflation years are followed by low inflation years, just as the stock market waxes and wans over time. I can’t predict the future, but I believe that high prices will moderate over time. It may take years to cycle. But it may also happen sooner than we think. The well prepared are going to be able to weather the storm.