Inflation. It’s the silent thief that sneaks into our lives and affects us all, whether we know it or not. Its slow creep into our wallets and bank accounts take away from our ability to afford the things we want and need, as well as make investments in our future. But how does inflation work, and what can you do to protect yourself from its attacks? This comprehensive guide will tell you everything you need to know about inflation, how it occurs, how it affects you and your money, and what you can do to protect yourself from its harmful influence on your financial situation.
What is inflation?
Most people think of inflation as rising prices. And it’s true that when prices go up, that’s inflation. But there’s more to it than that. Inflation is a measure of the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. The main cause of inflation is too much money chasing too few goods. When demand for goods or services outstrips supply, prices go up. When the price of something goes up, we have inflation.
– What causes inflation?: There are two main reasons why this happens: 1) Too much money being pumped into an economy and 2) Rising cost of goods and services (not necessarily due to a lack in supply).
– Why does it happen?: Too many dollars chasing too few goods means that these items are worth more in terms of what they can buy (purchasing power). So even if someone wants to buy less stuff because they’re trying to save their money, they’re still having trouble buying things because they’re so expensive.
What causes inflation?
In the United States, inflation is caused by an increase in the money supply. When the Federal Reserve (the Fed) prints more money, each dollar becomes worth less. This causes prices to go up since it takes more dollars to buy the same amount of goods. Inflation is also caused by an increase in demand for goods and services. When more people want to buy something than there are available items, prices go up. Lastly, inflation can be caused by a decrease in the supply of goods and services. If there are fewer items available for sale, then each item becomes more valuable, and prices go up. Finally, some economists believe that trade imbalances between countries cause inflation. For example, if the US imports more goods than it exports, it will run out of US dollars to pay for those imports. Other countries with higher levels of exports will accumulate lots of US dollars, and their currency will become inflated relative to ours. As this happens, those countries may start asking for higher prices for their exports in order to match their inflated currency with ours.
Why is inflation such a silent thief?
We don’t usually think about inflation in our day-to-day lives. We go about our lives, working hard and earning money. But inflation is always there, eating away at the value of our money. Over time, it can have a significant impact on our standard of living. Let’s say you’re planning to buy a new car in two years. You know that the average new car costs $30,000 today. If you buy that car two years from now when you need it, how much will it cost? Well, if inflation averages 3% per year over those two years (which is not unlikely), your car will cost around $32,500 – an increase of nearly $2,500! On top of this financial pain for everyone who has saved for retirement or other goals through 401(k)s or other savings vehicles where they rely on their savings growing over time to maintain their purchasing power while they wait to use them later on down the road.
How does currency devaluation steal from us?
Most people think of inflation as rising prices. And it is true that when the money supply grows faster than the underlying economy, prices do indeed go up. But there’s more to it than that. When holding a chunk of cash in your hand, you’re not just thinking about what you can buy with it today. You’re also thinking about what you could buy with that same chunk of cash tomorrow or next week, or next year. When your money buys less over time, those thoughts disappear. It becomes an ever-bigger challenge to make ends meet, and this pain is felt by everyone – rich and poor alike – because prices are going up for everything they buy, no matter how much they make.
How does inflation affect Businesses?
Businesses suffer when the prices of their inputs go up, but they are often able to pass on at least some of those increased costs to their customers in the form of higher prices. This process, called cost-push inflation, can lead to a vicious cycle in which businesses raise prices in response to rising costs, leading to even higher inflation. And while businesses may be able to pass on some of their increased costs, consumers and workers are not so lucky. When inflation goes up, the purchasing power of wages goes down, and people have a harder time making ends meet. So while businesses may suffer from inflation, it is ultimately consumers and workers who bear the brunt of the economic damage.
How does inflation affect employees?
Inflation affects employees in a number of ways. First, it can cause wages to stagnate or even decline in real terms. This means that despite working hard, employees may find themselves falling behind economically. Second, inflation can lead to higher prices for goods and services, which can also erode purchasing power. Finally, inflation can have a negative impact on retirement savings and investments, as well as on pension benefits. All of these factors can make it difficult for employees to keep up with the cost of living and make ends meet.
What can we do?
We can start by becoming more mindful of how inflation affects us. When we see prices going up, we can take a step back and try to understand why. Is it due to an increase in the cost of production? Or is it simply because businesses are trying to make more money? If it’s the latter, we can vote with our wallets and choose to patronize businesses that seem to have our best interests at heart. We can also invest in assets that will appreciate over time, such as property or stocks. And finally, we can try to save as much money as possible so that we’re not caught off guard when inflation hits.
Partner with United Funding Group
No one is immune to the effects of inflation, least of all small businesses. In these uncertain times, it’s more important than ever to have a reliable partner you can count on for funding. United Funding Group has a long history of helping small businesses weather tough times. We offer a variety of funding options that can be tailored to your specific needs. So if you’re worried about how inflation will impact your business, give us a call. We’re here to help.
Contact UFG, Today!
United Funding Group provides funding for all types of businesses, regardless of industry. In fact, we provide merchant cash advances for many industries, including retail, service, restaurant, and real estate investment. Whether you’re expanding your business or opening a new one, we can get you funded quickly and easily. Contact us today to learn more about merchant cash advances from United Funding Group, ufgfunding.com.