Inflation Can Help And Hurt
Inflation is often portrayed in the media as a bad thing, however, it is a necessary ingredient for our lives to operate in a smooth manor. While none of us likes paying more for products, inflation, in and of its self is not necessarily a bad thing. For example, stock market beginners need to know in real estate inflation allows our home value to increase while the payment remains fixed.
The following example shows how inflation can actually be helpful.
Jack and Sue bought a starter home in 1990 for fifty nine thousand dollars. Their payments, including insurance and taxes were four hundred and fifty dollars per month.
In 2005, the value of their home had increased two hundred nine thousand dollars. Their payments have also increased due to an increase in the homes assessed value and insurance rates. Their total payment in 2005 is five hundred and forty dollars.
Bob and Marie have benefited greatly from inflation. There investment has grown by a five hundred percent factor. At the same time, they are paying the same amount of money for the home in 2006 that they were 17 years ago.
Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23311
The following example shows how inflation can actually be helpful.
Jack and Sue bought a starter home in 1990 for fifty nine thousand dollars. Their payments, including insurance and taxes were four hundred and fifty dollars per month.
In 2005, the value of their home had increased two hundred nine thousand dollars. Their payments have also increased due to an increase in the homes assessed value and insurance rates. Their total payment in 2005 is five hundred and forty dollars.
Bob and Marie have benefited greatly from inflation. There investment has grown by a five hundred percent factor. At the same time, they are paying the same amount of money for the home in 2006 that they were 17 years ago.
Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23311
posted by Mr. Forex at
9:30 AM
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