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Inflation is an economic term that describes the rate of increase in prices. It’s a global phenomenon, and one which we’ve seen quite a bit recently. How can you prepare for how to deal with the effects it may have on your finances? We’re here to help with some easy tips.
First, it’s important to understand what inflation is and how it affects your money.
Inflation is when the cost of goods and services rises faster than the amount of money you earn. In other words, your money loses buying power.
Why does this happen? The price of goods and services fluctuates, so if anything, prices should rise over time. But that’s not what we’re seeing. Prices increase because there is a lack of demand for resources such as oil or steel, or other products that require these materials to produce them (like cell phones). This lack of demand causes a glut in the market.
As a result, the price for goods and services decreases. This causes the value of your money to decrease too. It’s like you’ve been handed a bag of potatoes and the price of potatoes has gone up by more than the amount that you got paid each year to put them in your sack.
If consumers stop spending, then companies are forced to cut costs in order to produce goods as quickly as possible with less money coming in. Fewer…
