I love talking about money so humor me as I share some facts. Read until the end and I have some thoughts you may find interesting.
So, I have watched as people talk about money over the last 20 plus years, and I have always been astonished that we don’t talk more about inflation and its impact on people’s personal finances. Here are some facts to think about.
Inflation is when prices rise and the purchasing power drops. That literally means youbuy less with your money. What’s troubling is when the income levels don’t track with inflation. That literally means people are becoming poorer. Yes, I said poorer. What’s even more troubling is when people are becoming poorer even when they may think they are making more money. This means most people aren’t making salaries in line with the level of inflation that has been seen over the last 40 plus years.
Basic needs go up and even when salaries go up they aren’t going up enough. The average U.S. employee's income has not risen relative to inflation for decades. That’s alarming to me.
Are you angry yet? What’s my point in all this? No, I’m not trying to upset people. I just don’t think people think through inflation enough.
Inflation negatively impacts people and that upsets me. I don’t want people to be negatively impacted by inflation. I want people to succeed during inflationary times!
What’s the solution? The solution that many people might jump to is to make a political decision on how to rectify it. Something like universal basic income might be coming to some people’s mind. Others might demand their employer pay them more. I don’t think these proposed solutions will help because inflation is only going to get worse. Now hear me out. I’m not saying people don’t deserve to be given raises. I’ve actually pushed for raises on many occasions. I just don’t think raises are enough.
I think the real solution is to help people learn to make more money even during inflationary periods. It’s going to take people learning how to think differently such as trying to leverage and hedge more.
Do you know that the people who succeed during inflationary periods are people who invest and grow income by purchasing assets that hedge against inflation?
Buying real assets is actually good during any economic period but during inflationary times it’s survival. Here are some things to consider.
Basic needs rise during inflationary times so people who invest in rental property for example will see cash flow if done right. The investor will take out debt issued by the bank, the investor will pay the debt payment, and as rents rise the investor will see more cash flow.
The same thing happens for businesses. Costs will rise and businesses will adjust their pricing to benefit from inflation. Take a moment and think about e-commerce. I have seen people succeed on a part-time basis utilizing e-commerce to make money. Higher prices have benefited the seller. That means good business owners, investors, and everyday folks are seeing more cash flow coming in by simply thinking differently.
What I am suggesting is a different approach. Get even instead of simply getting angry. I understand that not everyone wants to own a business and believe me I don’t think everyone should, but I think more people need to get creative and learn to make money without simply sitting back taking a salary and hoping that the retirement plan they have will be enough.
We can either be victims to inflation or we can learn to benefit from inflation. The choice is yours.
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