Inflation is something you might be hearing these days. What is inflation? According to Wikipedia, inflation is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. Should we be concerned of inflation?
So what this means is that your money will not be able to buy as much as you used to. For example, gas prices may increase and so it’ll cost you more to fill your gas tank. The cost of certain goods like meat have gone up so it’ll cost a little more to eat a steak or a hamburger. It costs more to make produce items and the increase in cost is paid by the consumer. You might notice that prices are going higher for the things you normally buy. This could be a reflection that inflation is coming.
Interest rates may rise along with inflation. It will cost you more to borrow money from the bank. If you’re planning a big home project or you want to purchase a car and need a loan from the bank, you’ll be paying more interest.
The Bureau of Labor Statistics released their Consumer Price Index report for April. In this report it stated, all items index rose 4.2 percent for the 12 months ending April, a larger increase than the 2.6- percent increase for the period ending March. Similarly, the index for all items less food and energy rose 3.0 percent over the last 12 months, a larger increase than the 1.6-percent rise over the 12 month period ending in March. The energy index rose 25.1 percent over the last 12-months, and the food index increased 2.4 percent.
Included in the report is the chart that visualizes the consumer price index percentage change month by month for the past 12 months. It’s a 37 page report and it contains a good amount of information.
While inflation may seem bad, it gives you an indicator how healthy the economy is. This can help you adjust your investments, reprioritize your allocations, and other financial decisions. With inflation, it could mean we are in for a rocky financial future possibly with stock prices decreasing in value. However, if you look long term and past inflations, the economy and the stock market will recover. Should we be concerned of inflation? These are my thoughts and my thoughts only. For financial advice, speak to your financial advisor. Don’t panic and make emotional decisions with your financials. Do your research and make sound decisions. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.