Real Estate Investment Articles

The Effect of Inflation on Your Financial Life

By: The Hughes Brothers

It is difficult to impress upon young people the effects of inflation on their future. Stories of “how much a loaf of bread cost when I was your age” usually fall on deaf ears. If you can find a way to teach your children the effects of inflation on their financial life, they will benefit for a lifetime. The one commodity that ALL young people have plenty of is TIME!

Inflation is an erosion of the buying power of money. Many retirees that live too long become poor because of inflation (their fixed income does not keep pace with the rate of inflation). Many young people (without an inheritance) can become wealthy if they harness the effects of inflation through their investments.

Since it is easier for our federal government to “inflate” the money supply than to increase taxes, long-term inflation is a good bet. Consider the inflation rate possibilities below:

Today’s Dollars                   Equivalent Dollars in 15 years
                              5%                             10%                            20%
1. $25,000         51,900                        104,400                     168,200
2. $50,000       132,700                        208,900                     770,351
3. $75,000       155,900                        313,300                  1,155,526
4. $100,000     207,900                        417,700                  1,540,702
5. $150,000     311,800                        626,600                  2,311,053

Ask yourself these questions:
1. How much will you need to retire on?
2. How much will you need to educate your children?
3. How much will the average house in your town cost?
4. How much will the average house in your town rent for?
5. How much will you need to be earning in 15 years to stay “even” with what you make today?

If you are interested in more information about how to protect your earning power in the house business, please go to our website www.realestateforprofit.com and check out our Products Page.

The Hughes Brothers

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