Understanding Inflation And How To Protect Yourself From Its Effects
Understanding inflation and its effects on our household and investment portfolio are crucial. We almost always have some inflation, meaning wages and prices increase which helps job creation and economic growth.
But it is not enough…not nearly enough progress has been made for women in many areas of money management, wages, investments, retirement yet women are more educated at higher levels and live longer than their male counterparts.
The absence of inflation is deflation, which means declining prices and could cause or worsen a recession as businesses lay off workers.
What Contributes To Inflation?
Strong consumer demand for goods and services could result in higher spending leading to higher inflation.
Natural Disaster Shortages
These disasters impact manufacturing plants, businesses, and residential areas. These unpredictable events may put temporary or long-term pressures on the production of goods, causing inflation due to scarcity.
A government budget deficit occurs when expenses outpace revenues, not unlike the household budget. Multiple fiscal stimulus packages related to hardships caused by the pandemic have been essential to provide funds to businesses and unemployed workers.
Higher Prices From Higher Demand Post-Pandemic
We may see some prices go up with increased demand and pressure to recoup lost revenues.
Many suggest that we will have higher inflation over the next few years. Higher inflation, so long as we don’t have stagflation or hyperinflation, is manageable. Several investments are attractive as inflation hedges for protection.
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