The Good News About Inflation Rates

Is there a positive side to our inflation rates in 2024? Yes, there is (trust me).

As you probably remember from high school econ, inflation is the general rise in the prices of goods and services over time. When inflation occurs, the purchasing power of money decreases, meaning the same amount of money buys fewer goods or services than before. 

Inflation is measured by the Consumer Price Index (CPI), which tracks the average price of goods that typical households purchase. Moderate inflation is normal in a growing economy, but when inflation gets too high, it can mess with economic stability.

For you, inflation means that daily expenses—such as groceries, gas, or rent—get more expensive (I’m guessing you’ve noticed). As I’m sure you also know, your income may not increase at the same rate. This can make budgeting harder, as your income stretches less to cover basic needs. Over time, if wages don't keep up with inflation, your overall standard of living could decrease.

Inflation can also make saving money tougher. If you're saving money in a low-interest savings account, inflation might outpace the interest you earn. 

For instance, if inflation is at 3% and your savings account earns 1% interest, the value of your money is basically shrinking by 2% each year. That means you’re going to want to consider investments that offer returns higher than the inflation rate, like stocks or inflation-linked bonds.

On the positive side, if you have fixed-rate debt, like a mortgage, inflation can actually help you. As prices and wages increase, the real value of your debt decreases because you're repaying the loan with money that is worth less than when you first borrowed it. 

That said, be careful. High inflation can lead to rising interest rates, making it more expensive to borrow money in the future.