There are really only two kinds of inflation you should be worried about:
- The inflation that starts costing you more money
- The inflation you can’t see
You notice the first one when you go and do your weekly shopping and leave the supermarket scratching your head and thinking ‘what did I put in the trolley that made it cost this much?’
The inflation you can’t see is different.
It comes in cycles. This kind of inflation sneaks up on you when your attention is on other things.
There is no need to worry about the inflation you see – it is already here and there is nothing you can do about.
The second kind? Well the sooner you start thinking about it the better. It is going to cost you a lot of money if you ignore it.
Just because it said on the news last night that inflation was falling, don’t let that fool you. Inflation is still there. Inflation is always there. It doesn’t go away unless you happen to live in Japan, but that’s another blog.
So how does this inflation affect you?
It starts with interest. Interest for most people comes in two different forms: High interest and not-enough interest.
For example if you are earning 1% on the money you have sitting there in your current account and inflation is running at 2% then you will be losing 1% of that money every year.
The more you put in, the more money you will be losing even though you are in credit.
So if you have £1,000 in your account and leave it there for 12 months the bank will give you £10 worth of interest and inflation will take away £20 leaving you £10 worse off. You probably won’t even notice inflation doing this.
There is absolutely nothing you can do with money sitting in a bank account. Unless you have it in a high interest account, Inflation will keep taking your money and that’s just the way it is.
To beat inflation you need to do something radical. This is something most people don’t like to do because they worry about losing money, paying bills and surviving.
What you need to do is invest your money. Yes you take a risk, but it is the only way to beat inflation.
The easiest and safest way to invest money is in property and other real assets. Property is something you can see, touch and live in.
Inflation can’t touch property because property doesn’t sit in your wallet.
Do you know what’s even better?
Inflation actually works with you when you invest in property. If you own a property you can put the rent up. Then the price when it is time to sell.
The value of property doesn’t stand still – only the paper money you use to pay for it. Yes property prices can fall as we have seen but in the long term they always rise.
There is just one thing to think about – high interest.
High interest is something the banks won’t give you unless you allow them to take your money and tie it up for a long time.
You won’t have access to it and you won’t be able to put it straight back in your wallet. High interest can also hurt you.
The banks are much more generous with the interest they add on to the money you borrow. Back in the late 1980s lots of people could afford to buy property, until high bank interest rates came along.
People could no longer pay their mortgages when interest rates soared to 16% and they were forced to hand back the keys. The high interest rates were needed to keep down inflation.
The great thing is, it is easy to protect yourself from high interest and inflation.
You just need to invest in the right property at the right price. Then find the tenants who will cover your costs.
So go and beat inflation – your wallet is depending on you.
via:http://www.colordarcy.com/wordpress/banish-inflation-wallet/4736/
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