How the Rate of Inflation Affects our Perception of Money

Inflation is a fact of life in every country of the world. Venezuela, an extreme example, has had a record annual rate of inflation of over 20% for the last five years. Thankfully the US, which happens to be the country I call home, averages an annual inflation rate of only 2-3%. What do these numbers really mean though? And going back to the title we have to ask the question, how does the rate of inflation affect our perception of money? Let’s look at 3 key ways inflation does this.

1. The Rate of Inflation is in Continuous Motion

rate-of-inflation-pereceptionThe US Beaureau of Labor Statistics (BLS) has a massive statistical table listing the US rate of inflation (as calculated by the Consumer Price Index) going all the way back almost 100 years to 1913. As you can see (if you clicked the link), no two years are alike. Some years, like 1918, inflation was at a record high of over 20 percent, meaning the economy was booming. Further down the timeline, we see 3 consecutive years of negative inflation rate in the early 30’s which of course coincides with the great depression and a shrinking economy. Over the last 20 years, the US inflation rate has been fairly stable, never fluctuating more than 5% in any given year.

2. Inflation Cuts Into Savings

Let’s imagine for a moment that you have $100,000 to invest and you put it in a no-risk 5 year CD (Certificate of Deposit) at your local bank with a 3% rate of return. A few years ago that rate would have been considered low, but at the time of this writing, you’d be hard pressed to find a bank that would offer you that interest rate. At the end those 5 years with the interest compounded annually, you would now have $115,927.41.  Or would you? What if the inflation rate averaged 2.5% over those same 5 years? Calculating for inflation, you’d really only have $102,525.13 in inflation adjusted dollars. See how inflation plays with your mind? Now, go apply this principle to what you think you are successfully squirreling away for retirement and see what you come up with.

3. Inflation Rate and the Annual Salary

I remember in 1995, thinking $35,000 was a decent salary for a white collar worker in the Northeastern US. With $35,000 a year, you could live quite comfortably with all your needs (and even a few wants) met quite easily. Today, if you wanted to live at that same level, an annual salary of $50,000 is needed. But, in 1995 $50,000 would have sounded extravagant. The average pencil pusher didn’t make that kind of money. Let’s look at another example. In 1995, folks who made 6 figures had this aura around them. How do you make SIX figures?! Today, making six figures, especially in a two income household, is quite common. See how the rate of inflation sneaks up on us and in essence robs us?

How has inflation rate affected your perception of money?

 

 

 

 

 

 

This entry was posted in Finance and tagged , , , , , , , , . Bookmark the permalink.

25 Responses to How the Rate of Inflation Affects our Perception of Money

  1. One of the best easy make money online quick schemes on the internet today is the linking
    or advertising game. In my country, South Africa, wine makers can tell a mile away if a wine is of good quality or not.

    You simply promote affiliate products and when you make a sale,
    you earn a sales commission.

  2. This song should be played on the radio now and with
    any luck this radio board op will get it into
    the right hands soon. Controllers can go for anywhere from $30
    to $seventy five depending on what is integrated. As together with Clash of Clans, you possibly can speed-up output through in-app purchases.

  3. This online casino supplies their players the most recent casino software from Microgaming – the new Microgaming ‘Viper’ applications, presenting remarkable graphics as well as
    more than 100 casino games to choose from. With beginner’s fluke, you could win as many as 6,
    000 coins. The Cop and Vault are the scatter symbols In the
    Bank round.

  4. Luciana says:

    Guaranteed safe and reliable- Online movies are safe to
    watch. It may give you some tips on how to persuade and please
    your partner or the person you love. There are several
    different websites that specialize in broadband TV streams, movie hosting, PPV,
    & more.

  5. Excellent items from you, man. I’ve keep in mind your stuff previous to and you’re
    just extremely magnificent. I really like what
    you’ve obtained right here, certainly like what you are stating and the way in which in which you are saying
    it. You’re making it enjoyable and you continue to care for to
    stay it sensible. I can not wait to learn far more from
    you. This is actually a terrific website.

  6. Il est une expansion, après tout, si évidemment le combat et le menu mécaniciens sont les mêmes,
    puisque vous jouez dans le même monde exacte de jeu . Il se
    transforme bientôt en un jeu de la mort pour tous,
    mais l’un . La plupart des jeux sont maintenant disponibles pour jouer en ligne avec d’autres .

  7. Edison says:

    I know alot of people today at school who
    are so frustrated with the World’s hardest game, so I decided
    to make a short and basic tutorial.

  8. Hello, I desire to subscribe for this weblog to take hottest updates, thus where
    can i do it please assist.

  9. regime says:

    I must thank you for the efforts you have put in penning this
    website. I am hoping to check out the same high-grade blog
    posts from you later on as well. In fact, your creative writing abilities has encouraged me to get my own website
    now 😉

  10. This blog was… how do I say it? Relevant!! Finally I’ve found something that helped
    me. Kudos!

  11. With Guns n Roses appearing on the sound track, a motorcycle chase and a series of superb battles between the T-800 (Arnold Schwarzenegger) and the new T 1000 (Robert Patrick) director James Cameron matches
    the cutting edge CGI used in Terminator 2 with some remarkable sound effects
    that really bring your surround sound to life. Highlights this year
    include insightful discussions with actors who are nominated for Oscars in 2015,
    such as Patricia Arquette, Ethan Hawke, Eddie Redmayne, Steve Carell, J.
    I seriously considered putting The Rocky Horror Picture Show on this list, but
    even though Tim Curry in fishnet stockings is disturbing enough to make
    you wish you were not human, it’s nothing compared to watching him as the scariest clown on earth
    devouring children using multiple layers of sharp teeth.

  12. Hi there, just became alert to your blog through Google,
    and found that it is truly informative. I’m going to watch
    out for brussels. I’ll be grateful if you continue this in future.
    A lot of people will be benefited from your
    writing. Cheers!

  13. Margareta says:

    They fail to realize that very very few players started off
    dominating right away, most earned their skill after many deaths.
    This isn’t the first time, sadly nor will it be the last,
    that video games have been blamed for a mass shooting.
    These programs will help you create backups for your
    games, which are acceptable for game consoles because they have the capability to insert the codes needed by Xbox to read a particular
    game.

  14. Pretty! This was a really wonderful post. Many thanks for supplying this information.

  15. selidbe says:

    Good write-up. I certainly love this website. Keep it
    up!

  16. Candy says:

    Undeniably believe that that you stated. Your favourite reason appeared to be at the net the easiest thing to remember of.
    I say to you, I definitely get annoyed whilst other folks think
    about issues that they just don’t recognize about.
    You managed to hit the nail upon the highest as smartly as outlined
    out the whole thing with no need side-effects , folks could
    take a signal. Will likely be back to get more. Thanks

  17. I was recommended this web site by means of my cousin. I’m now not certain whether or not this submit is written through him as nobody else realize such targeted approximately my trouble.
    You’re amazing! Thanks!

  18. Hot dog says:

    I�m amazed, I have to admit. Seldom do I come across a blog that�s both
    educative and interesting, and let me tell you, you’ve hit the
    nail on the head. The issue is an issue that not enough people are speaking intelligently about.
    I’m very happy that I came across this during my hunt for something regarding this.

  19. Much more will never come to know which of them the son every day and chat with those you
    meet outside, in real life. The first thing it’s best to in no way ever do is pay an Request
    Fee. Most cards charge a 3% transfer fee which can still be considered low compared to what
    you pay on your original card, but then again, how long will it take
    you to pay off the new card.

  20. used bmw says:

    I wanted to take the time to state my passion towards this amazing website and you!

    Caring it!

  21. This design is spectacular! You certainly know how to keep
    a reader amused. Between your wit and your videos, I
    was almost moved to start my own blog (well,
    almost…HaHa!) Great job. I really loved what you had to say,
    and more than that, how you presented it. Too cool!

  22. Thanks for some other excellent article. Where else could anyone get
    that kind of info in such an ideal way of writing? I have a presentation subsequent week,
    and I’m at the look for such information.

  23. essay papers says:

    This site was… how do I say it? Relevant!! Finally I have
    found something which helped me. Appreciate it!

  24. Hiya very cool site!! Guy .. Beautiful .. Amazing .. I’ll bookmark your website
    and take the feeds also? I am satisfied to find so many useful information here in the put up,
    we want work out more techniques on this regard,
    thanks for sharing. . . . . .

  25. Immigration issues can usually be complicated and obscure.
    If you have any issues at all with immigration guidelines or
    processes, an immigration lawyer might be of much assist.
    Working with a talented lawyer can save you much time and disappointment in trying to deal with the completely different specifications.
    Additionally, if in case you have an immigration listening to, a lawyer can be current to make sure
    that your interests are totally protected. Most migrants attorneys spend their time serving to individuals who are bother working with migrants
    specifications. Working with an legal professional can prevent a
    lot time and frustration in making an attempt to kind out the
    totally different requirements. When you’ve got
    any issues at all with immigration laws or procedures,
    an immigration lawyer can be of a lot help. Search for the
    perfect lawyer on the American Immigration Attorneys Association website so that you might be reasonably certain you’re dealing with someone who is
    aware of proper laws and insurance policies.
    The general public Function. 9: 13-31 – by way of
    American University Washington D.C. Robert A. Moffit and Peter T.

    Gottschalk, “Ethnic and Racial Differences in Welfare Receipt in the United States,” in Neil Smelser, William
    Julius Wilson and Faith Mitchell, eds., America Changing into:
    Racial Trends and Their Consequences, Quantity
    II, National Academies Press, Washington, D.C.

Leave a Reply

Your email address will not be published. Required fields are marked *