The door swings open, the small bell rings to let the attendant know that you are in the realm of his domain. As a potential buyer he knows you’re either there to purchase gas and/or there to indulge in the ceremonious waltz through each aisle as you attempt to make a choice on the snacks that bring back the sense of adolescent nostalgia. You made your choices from a small assortment of chips, candy, and juices that cause you to salivate at the thought of you engorging what you have purchased when you get home. You walk gleefully to the front and are ready to pay for the variety of things that you paid for… You get ready to pull out cash to pay for the items with you having a set amount in your head & the clerk hits you with something that you were not expecting… A higher price… “Damn I don’t remember it being that much… That’s damn near $20” What happened, what has changed from your age pubescence up until now. The packaging is the same, the chips/drinks/candy tastes the same and there is still the same amount of perishable goods in the packaging, so what is going on? How did $20 start to feel that it’s just worth an adult $1? The answer is quite simple, it’s inflation…
Inflation in short is the general increase in prices for goods, now it may seem hard to believe but we have all seen evidence of it as we have become older in this world. Gas in the 1990’s were $1.05, milk $2.78, eggs $1.00, stamp $0.25, cost of a new home $149,800, etc. If we travel back further in time let’s say that you just have $10 on you what is that worth in 1980 on any given day in that decade? According to the Bureau of Labor Statistics consumer price index, prices in 2017 are 197.48% higher than prices in 1980. The dollar experienced an average inflation rate of 2.99% per year during this period. In layman terms, $10 in 1980 is equivalent in purchasing power to $30.75 in 2017, a difference of $20.75 over 37 years, plus the base $10 you’re looking at the value being triple in the 80’s more than what it is worth now. So on a pecuniary level what does that mean for us as a community within an infrastructure? With the cost of living rising every year and doubling over every decade what does that mean, how can we progress? With the cost of living rising certainly the wages have increased as well? In 1990 the minimum wage across the board was $3.80 while tracking that trend of pay you’re looking at a take home after taxes of $7,904.00 while the housing market was in the area of $128,500.00. Fast forward a decade the minimum wage in the year 2000 was $5.15 equates to a weekly pay of $206, monthly pay of $893, and an annual salary of $10,712 while rent for a 1 bath & 1 bed was $650.00-$700.00 depending on the area you resided in. Wages never were supposed to keep up with inflation but it was more manageable for our predecessors because you could get more value for your dollar.
How do we combat inflation? What is going to be the trump cards that we can rely on as a community to even out the playing field? There are many answers to this question but the two answers we’re going to focus on is portfolio & passive income. Portfolio income is income from investments, dividends, interest and capital gains, while passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved. Basically it’s the process of making your money work hard for you; it is always working for you even while you sleep. As a community we need to dedicate our time to understanding the topic and the irrefutable fact that we work very hard for our money, sticking it into a savings account to accrue 0.00001% of a return is not going to cut it while inflation has doubled every decade. Comprehending that saving is the first step but that’s not the last step, acquiring homes at a low cost and flipping it to be a rental property, getting into the market and capitalizing on a bear market to when it transitions to a bull market.. These are just a few ways to come ahead while inflation continues to rise..