Inflation And Your Money

By Mike Swanson

Inflation is often portrayed in the media as a bad thing, however, it is a necessary ingredient for our lives to operate in a smooth manor. While none of us likes paying more for products, inflation, in and of its self is not necessarily a bad thing. For example, stock market beginners need to know in real estate inflation allows our home value to increase while the payment remains fixed.

Here is an example of how inflation can be a good thing.

Jack and Sue bought a starter home in 1990 for fifty nine thousand dollars. Their payments, including insurance and taxes were four hundred and fifty dollars per month.

In 2006, the home was appraised at two hundred ten thousand dollars. Due to increases in taxes and insurance the payment for the home had increased to five hundred ten dollars.

In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.

Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.

While none of us want to have runaway inflation which often is very harmful to those on fixed incomes, we all depend on some amount of inflation to keep our economy running smoothly.

While we do not want runaway inflation, we do need balanced in inflation. That means that the price of goods will grow slowly along with take home pay and property values. - 23217

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