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Inflation Woes
By Daphne | April 16, 2008
Inflation takes a large chunk of your money. Rising costs make shopping and saving on a budget difficult. Especially if you are trying to live within your means, pay for current expenses and save money for the retirement.
If you save money now, even at the same amount that you currently contribute, you will have some added security for the future. Relying solely on cash investments may be a good way to diversify but will not give you the greatest yield for long range savings goals.
Even worse, as a hedge against inflation… you may decide to just stockpile cash, in your closet, in a drawer or under your mattress. Some interest gained is better than none at all. Food and energy prices have been increasing dramatically and these are the things that you will definitely need in the future.
Food and anything that is transported by truck have an additional “tax” added to their costs because of the increase in fuel prices. Keeping your pantry stocked will cost about 4 percent more than it did last year. If you are employed and your wages didn’t increase 4 percent, where is that money going to come from? It may be that you decide to decrease your entertainment budget or you cut back on something else.
Inflation slowly erodes your financial security making it more difficult to pay for necessities let alone extras. When you see that your dollar is buying you less than it did just a few weeks ago because of increasing prices, then you need to make a decision to buy less since you can’t easily spend more. Purchasing less does not mean you should try to make up the difference by stopping contributions to your retirement fund. If you really can’t make ends meet, then decrease your contributions but save/invest something because you need to make sure that you will be able to meet your long-term needs.
Prices for food have increased over the years, not decreased. You may not want to buy a seaside condo for your retirement but it is guaranteed that you will want to eat and use electricity. Do not think that by cheating yourself out of retirement savings now because of inflation that you will be able to get ahead, you won’t.
Topics: April 2008 |