real inflation and a pathway to becoming a HAVEInflation is a tricky subject.
I don't think any of the measures that we see in the media provide an accurate accounting of how inflation impacts my life. To that end, inflation impacts everyone differently depending upon their spending habits and their budget.
I think a more realistic way to look at inflation is to look at how changes in the prices of the things that we use the most impact our lives
I have never read anything that is a fore-runner of what I have written below. I can't point to any articles to back stop my ideas. In fact, I haven't ever seen anything that even addresses what I think are the "real issues" of the inflation that each of us has to deal with individually
Transportation and heating:
When gas prices are probably up 50% since the pre-covid days. What does that mean s to each of us. Those that commute an hour each day to work by car get slammed vs those that work at home.
I assume that Canadians have felt some impact of higher natural gas prices, but I really don't know (wife's department). However, the fact that delivery charges and admin fees seem to make up a significant percentage of our bills, I don't think home heating costs in Canada have impacted most of us to the "ouch" point. Europe is a different story.
Unless you live off-grid and grow or hunt for your own food, the high price of oil and gas is tearing away at your ability to meet your financial obligations.
Food costs:
Transportation costs have a huge impact on food costs. The horrible part of this equation is that food providers are quick to move prices up to accomodate higher shipping costs but any downward movement in prices is very sticky due to the fear (or is it just greed) that prices may pop back up again at the will of the Wall St. investment dealers who have made electronic resources far more influential than actual commodity prices.
My wife tells me that food costs are up at least 50% since the onset of covid. Even though gas prices have dropped by about 25% from the high of a few months ago, food prices don't reflect the change. Those that eat a lot of meat, or buy a lot of pre-packaged goods who "want what I want" are likely paying seeing a real impact of spiralling food costs.
Housing costs for homeowners
I don't ever remember FOMO for housing like we have seen in the past couple of years. First time home buyers, buoyed by interest rates below 2% drove the price of housing to levels that make old guys like me shake my head.
My best GUESS is that housing prices went up 50% since the beginning of covid. Now, the prices are expected to retreat by 25%. When you do the math, that puts the expected bottom at 12.5% above the pre-covid prices. Unless someone got trapped by ill-timed purchases or sales, all in all, the net movement in housing prices is not outlandish relative to the inflation of everything else.
Housing cost for renters
As with all inflation, the real drama ends up in the hands of the poor, which in today's world means a bigger and bigger portion of the middle class.
Companies (Black Rock for example) have been buying up houses like crazy. I believe that 30% to 40% of all homes and condo's are now owned by investors that own more than one property. Other than providing for the future of our kids, there is only one reason to buy more than one home, which is to make money.
Those that have money win on the backs of those that don't have money. Always was, always will be. Yup, risk is involved for investors, but who always ends up with the money?
A combination of low interest rates, and the massive new wealth created by governments injecting trillions of dollars into the economy (to get re-elected instead of toughing it out) which tiggered investment purchases sent housing prices out of this world.
What has been the net effect on renters? Devastation.
One of our brood had to leave the house she was renting as the owners wanted to take advantage of the boom in housing prices. She and her husband put in bids up to 10% higher on more than a dozen rentals without getting a place to live. This is only my take, but it appears that the renters had no intention of renting as their interest was to demonstrate the rental income potential to increase the value of the homes to foreign buyers. In the end, I had to put up an entire year of rent in advance at the inflated prices to keep the kides (and their tribe) from descending like locusts on our home.
I mentioned in a previous post that we recently bought a condo for one of the brood at about 25% off the high. What hasn't come down is the rental prices which I'm using as a negotiating tool for any favours I can think of.
The bottom line is that the owners are forcing the cost of higher prices and now higher interest rates down onto the renters, who typically are the least able to afford it. The only logical outcome is that renters are going to be adding tennants to split the bill
Interest rates
Doubled and tripled. Nuf said
Dining out
Ridiculous and not coming back down.
Entertainment and travel:
Taking the kids (grandkids in my case) to Wonderland now requires a mortgage.
Annual vacations, a treat for most families in the past have become a "if we do this, we have to give up that" for many. Flight and hotel costs have skyrocketed.
What does this all mean?
You need to be a HAVE because the future for the HAVE NOTS is getting bleaker and bleaker. Short of the next revolution, nothing is going to change.
How do you become a HAVE?
Hopefully you have parents that can help, or you can marry money.
On a more serious note, from what I can see, there are three requirements to becoming a HAVE if you are not already there.
One is to spend less than you make. People are softer today than they were when I was growing up. Maybe that is due to the fact that it seems so hopeless today vs my day when anything seemed possible. So many young people want to "live for the day" as opposed to saving. I can tell you from experience that the world has so much to offer that is free. The trick is to live your best life without succumbing to the perils of advertising which has only one purpose which is to get you to give the advertiser your money.
The second is to invest your savings in stock market or real estate. You must get your money working for you.
I agree whole heartedly with Experienced that there are times when you need to move your money to the sidelines in order to take advance of pending SALES, but I think it is imperative to keep your money in the market as much as possible.
Third is to start early and don't fall off the bandwagon. The impact of compounding over time is astounding.
The financial world offers many examples of shortcuts such as recent examples of cannabis stocks, crypto, meme stocks and so on. Shortcuts are popular because to many, it seems like the only way out. You can win, just like you can win a lottery, but most end up losing everything they invest.
Final answer
Start early, live withing your means, save, invest in real companies to get your money working for you, and do your best to never get distracted from the plan.
The central banks, politicians, and corporate giants (the elite???) are going to mess with your life. They are going to try to take what you have and they will if you let them. Markets are going to get manipulated. Protect yourself by building your own little empire.
That is what I have taught my kids (about money) and what I hope they teach their kids. However, it up to them and all i can do is love and support them.