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What Is Inflation?
Inflation is simply a term that applies to rising prices.
The Consumer Price Index, or CPI, is the most commonly cited measure of inflation.
It reflects theannual percentage changein prices for various consumer goods.
What Causes Inflation?
Explaining what causes inflation can take a college professor and a full semester.
But there are lots of factors that can create this situation.
One of the chief problems during 2020 was that theglobal supply chainbroke down.
Who Benefits From Inflation?
Primarily, however, the benefits are on the business side.
For example, some companies benefit from rising prices for their goods, such as food producers.
But it can also help savers, as the interest rates they earn on their bank accounts also rise.
Who Is Hurt by Inflation?
Consumers are generally hurt by inflation across the board.
Although wages generally rise during inflationary periods, they dont typically jump as much as expenses.
Business can also suffer right along with consumers.
Rising wages can also create the same pressure on a companys profits.
Here are some of the most common.
Housing and Rent Price Fluctuations
Both housing prices and rent tend to increase with inflation.
This can be good if you are a homeowner, as your net worth will increase.
You may also get a higher price for your home if you sell it.
Landlords may also increase rent simply to keep up with their own higher costs of living.
This means that when the CPI increases, your daily cost of living is likely to rise as well.
Grocery prices can be particularly volatile during inflationary periods.
The average price of eggs jumped by 54% over that same time period.
In fact, education and healthcare costs tend to rise even more than the average gain in inflation.
However, your long-term investments might suffer a few hiccups.
However, as inflation and interest rates come back down to Earth, stock markets can boom.
Important to note is that the stock market is a forward-looking entity.
If youre aconsistent, long-term investor, you should just stick with your plan through thick and thin.
Without having to makedebt service payments, youll have more available cash in your budget for your basic necessities.
Boost Your Income
One of the best ways to combat rising prices is to boost your income.
During the coronavirus pandemic, for example, high-yield savings accounts paid an APY of below 1%.
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