Is inflation really worse that it used to be?
Hi Friends,
Today I got curious about how much buying power the dollar has now compared to the previous years. I've been reading one of my favorite books on simple living and it was written in 1980 by a Mennonite woman named Doris Janzen Longacre.
In Living More With Less, Doris often talks about the energy crisis they are living through at the time and how to better steward our resources. The numbers given as examples are so far from our understanding 46 years later that I had to do some research into what they look like in today's numbers.
The numbers really surprised me. From the 1970's - 90's the value of the dollar decreased by well over 15% every 5 years. The yearly inflation rates reflect these changes.
What about how we've been feeling the last 5 - 6 years? Things have felt tighter than previously. We've heard inflation all over the news, but what has actually happened since 2020? Is it any different than it was 10 years ago?
In the example below, using the U.S. Bureau of Labor Statistics Inflation Calculator, I took the year 2000 to be the base amount and used both $50,000 and $100,000 to see how much each would be worth between 1970 and 2025. Every 5 years the difference is calculated and the increase between the years.
For example, in 2005 if you wanted the same buying power ie salary as $100k in 2000, you would have to have $112k. An increase of 10.96%.
Between 2020 and 2025 that amount increased by 18.79%, meaning the salary of $152k in 2020 would need to be up to $188k in 2025, just to keep up with inflation. This is without taxes or any other considerations.
Okay, so what does this all mean? What on earth do we even do about it?
A few things.
1. Taking a look at history is good because it gives us context. Things are already starting to even out and not increase so dramatically as they have.
2. Don't be hard on yourself, take a deep breath! If you too have felt the stretch of the last few years, it's not just you. Our money really has changed value faster than it has in the last 25 years.
3. Following common financial advice, look to keep your savings somewhere that grows interest, even if it is just keeping up with inflation. Such as a high interest savings account or a money market account.
4. With inflation always increasing, if you can, look to how you can keep your income to at least match it.
5. As always, knowing where your money is going adds so much peace of mind, even through inflation.
Just a disclaimer, anything written here is for informational/opinion pieces only. Things written are from my experience and general knowledge.
I'd love to hear your thoughts on this! Just write a comment or email and I'll see your response.
Thanks for being here and if you have found these email useful or interesting, share with a friend.
- Katie
THOUGHT OF THE DAY
"Simple living is not our goal. Simple living is merely a means by which we can free ourselves and our resources for service to others in a world gone awry."
- Jim Stentzel quoted in Living More With Less