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Understanding Inflation

Melissa Osika, MBA




Welcome to the prosperity blog cast - Where we have just one goal to help you live a life of prosperity.  Here now is your host. Good morning and welcome to the prosperity broadcast. 

Today we're going to talk a little bit about inflation. What is inflation - it is the general level of prices for goods and services increasing well there is simply a decrease in currency. Simply put your dollar didn't buy as much this year as it did last year  

Let's look at this chart for a moment. 

Income earned by a $100,000 investment in a six month cd back in 1990, you generated $8,000 of income and that same $100,000, you only needed $5,000 to beat inflation. Therefore, you had a $3,000 surplus. 

Fast forward 29 years later. A $100,000 investment in a six-month cd only generated $837 dollars. However, you needed $2,200 of income to beat inflation 

So for all those people that like to sleep with money under their mattress or put it in a cookie jar, you actually lost $1,363 of purchasing power.  

What does this represent? Well cash isn't always king. We don't have the safe haven that we did back in 1990. 

So inflation can affect investments in several ways. Most notably by rates of return as well as purchasing power. Again when prices rise a fixed amount of money has the power to purchase fewer goods and services than it did the previous year.  

If you have any more questions about inflation or anything else in general, feel free to contact us 312-697-1600. If not, we'll see you soon – Thanks!