The obvious impact of inflation on your savings is that the purchasing power is erroded. This means that if you stash $100 under the mattress today and inflation is 3% per year when you come back a year from now your $100 will buy 3% less stuff. Put another way you would need $103 to buy the same amount of goods a year later. When you extend this to 10 years you might think that it would mean that you would need $130 to buy the same amount of goods but because of the effects of compounding you would actually need $134.39. You can use the Retirement Planning Calculator to calculate the impact of inflation on your savings. As time goes on the impact of "only" 3% inflation compounds making … [Read more...]
The Impact of Inflation on Retirement Planning
Planning for retirement is difficult enough without having to worry about inflation. There is a lot to consider when you stop working a regular job. Do you plan on living where you are now. Do you want a change of scenery? Would you prefer a place with less maintenance or a place where you can have a big garden or a workshop where you can build things? There of course the financial aspects to consider as well. Will your retirement savings be adequate to provide the type of lifestyle you desire? There are a variety of Retirement Planning Calculators that can help you try to figure out how much you will need to save to have a happy retirement. You need to estimate your expenses once you are … [Read more...]
Cost of Living – Fish and Chips
Cost of Living Fish and Chips Fish and chips still remains the favorite take away meal in the UK despite fierce competition. The exact origins are unknown but it has been established that chips arrived from France during the 18th Century. There was also mention of fried fish and bread in ‘Oliver Twist’ by Dickens, published in the 1830s. The Oxford English Dictionary claims the earliest usage of "chips" in this sense was in Charles Dickens' A Tale of Two Cities (published in 1859). Fish and chips became standard fare among the working classes in Great Britain due to the efficiency of trawl fishing in the North Sea, and the development of railways which allowed fresh fish to be rapidly … [Read more...]
Cost of Living
The cost of living or (COL) varies from state to state and city to city and even from neighborhood to neighborhood. Some areas have seen housing costs decrease dramatically in the years since the housing bubble popped in 2008, while others have only fallen slightly. But the Cost of living is more than just housing costs it is the amount of money it will take to maintain the same standard of living in various places. Changes in the COL over time are often calculated via an index such as the CPI index that sets costs at a certain date at 100 and then recalculates costs at intervals. COL calculations are also used to compare the cost of maintaining a certain standard of living in different … [Read more...]
Australia- Iron Ore, Housing and Unemployment
Speculation Mounts Over RBA October Meeting As the RBA heads towards it October meeting, there are a number of important issues on the agenda. The price of iron ore which was one of the major topics of the September meeting have now seen a 26% resurgence in price and the world’s fourth biggest exporter of iron ore, Fortescu Metals, has announced that its US$4.5-billion debt deal will now enable it to refinance any outstanding deals. The central banks in Europe and the United States have announced their intentions to fight off inflation and stimulate asset prices by printing unlimited money while China will be contributing a $150-billion package to the mix. Unemployment Despite … [Read more...]
What is “Leverage”?
Leverage is... The basic definition of "Leverage"is the mechanical advantage available from using a "lever"this idea has been expanded to apply to other types of advantage such as money, finance and even positional advantage. The Classic Example of Leverage... As a child I would often go to the playground and play on the "See-Saw" aka. "Teeter-Totter" it was a board fixed in the middle that allowed two kids (one on each end) to ride up and down based on their weights being equally balanced. The device didn't work all that great if one kid was considerably larger than the other one. The heavier kid would crash to the ground while the lighter kid would be launched into the air. This … [Read more...]
The Effects of Quantitative Easing
Quantitative Easing Effects- You have probably heard that the massive inflation of the money supply through Quantitative Easing is going to result in hyperinflation or at least massive inflation. But so far that hasn't happened. As a matter of fact since the end of QE2 in June of 2011 inflation rates have fallen from 3.63% in July 2011 to 1.41% in July 2012. How is that possible? The first reason is that the FED is playing a game with the banks. The FED loans money to the Banks at nearly Zero percent interest the Banks turn around and loan the money to the Government at 3% interest to finance the deficit. This gives the banks plenty of profit to shore up their sagging balance sheets. But … [Read more...]
Aussie Costs of Spending, Living and Credit
Aussie Credit Card Reforms The recent credit card reforms, enforced starting July 1, have stirred up quite the debate on the matter, with analysts and experts rushing to argue whether or not the reforms are actually beneficial for the end-user. However, the habits, debts and expenditure afforded by that very end-user are causing an extended discussion of their own. Where does the truth lie? Is Australia really sinking under credit card debt? Are the new reforms going to spell a slow, yet certain and agonizing death for plastic? Or is the state of the nation’s money far more positive than we imagine—and simply suffering at the hands of global recession-induced cries of panic? … [Read more...]
Inflation Definitions
Inflation Adjusted Prices What is the inflation adjusted price of common commodities? Historical Oil Prices Chart - This Chart compares Monthly Average Oil Prices with their Inflation Adjusted Oil Price. Historical Crude Oil Prices (Table) - The first table shows Annual Average Crude Oil Prices from 1946 to the present. Prices are adjusted for Inflation using the Consumer Price Index (CPI-U) as presented by the Bureau of Labor Statistics Inflation Adjusted Electricity Prices - Residential electricity prices in the U.S. have risen from an average of 7.83 cents per kilowatthour in 1990 to an average of 11.44 cents per kwh in 2010. This is a 46% increase in 20 years and sounds like a … [Read more...]
What is Hyperinflation?
Hyperinflation Hyperinflation is an extremely rapid period of inflation, usually caused by a rapid increase in the money supply. Usually due to unrestrained printing of fiat currency. See: How Does Gold Fare During Hyperinflation? Unfortunately, there is no exact percentage where inflation turns from "ordinary Inflation" to "Hyperinflation". So you can't say for instance that 9.9% inflation is ordinary but 10% inflation is hyperinflation. Typically in hyperinflation it just gets progressively worse. Every month the inflation rate just gets higher and higher until the curve goes hyperbolic. Classic Hyperinflation Classic examples are the Hyperinflation of Weimar Germany and the more … [Read more...]
