Finances

Inflation What?

Since 2020 the US has seen over 18% inflation. What does that mean? It means on average it costs 18% more to buy the same set of goods and services as it did in 2020. If you're wages haven't gone up, that means you're effectively making 18% less than in 2020.  On one note, that prompts a comment like "do something about your income, get a better job." which might be valid. Another comment would be "Inflation is the killer of cash reserves. ". If in 2020 you had savings of $50,000 and could buy 1000 lb of food meaning its $50/lb, today you would pay $59/lb, meaning you would only be able to buy 847lb of food! There's actually a lot that could go into an example like that but it's basically correct. Thats why keeping cash is generally a bad idea. Tomorrow your $1 will likely be able to buy less than your $1 could today. One example I read about this is one of the gold mines near Deadwood SD was sold in 1877 for $70,000 ( https://en.wikipedia.org/wiki/Homestake_Mine_(South_Dakota) ). Immagine the seller took that $70,000 and buried the cash in a tin can in the back yard and his great grand kids found it today. It'd be worth $70,000. I don't know anyone who wouldn't take $70,000 cash, that'd be an awesome thing to find. However, when you account for inflation, meaning if they had invested that $70k in an investment making only what the inflation rate is, the great grandkids would have over $2,000,000!!!!

There's definitely a need to hold cash for general purchasing power, but beyond that, funds would likely be better served by investing in any type of investment at least matching inflation.  

So what does that mean for being prepared for life's curveballs. Well, if your planning leads you to only be concerned about the short term, maybe 6 months or less, and you have cash to cover it, probably not much. If your scenarios have finance as a part stretched out over the next 30 years, you might think about non-cash ways to store your funds that will at a minimum keep up with inflation on value. 

That might put you down the road of investing in gold or siliver or other precious metals. Maybe other items you can trade with. If this means storing some physical item of value like a piece of gold, the big thing to think about is how will you exchange that for value when needed. Obviously if you have a 1lb bar of gold, worth around $23k, and you need to buy somthing for $500, you may have trouble breaking that bar down into the right size to buy whatever you're looking to buy, not to mention, is anyone going to take gold from an unknown source for payment. So, think about how you would convert whatever your store of value is into a viable payment form.