Inflation Eats You Alive Financially, In More Ways Than You Think…

When I was a teenager, gasoline prices were never a concern to me.  Gas was 27 cents per gallon and my old car got eight miles to the gallon.  This “27-cent-cost” wasn’t a problem because I never traveled more than three miles anywhere I went, whether to school, my part-time job, or fishing.
Be we all know what gasoline costs are today.  They have been as high as $4.75 per gallon and now so many people commute to work with average distance of 25 miles in one direction.  This cost is part of our daily discussion because we are traveling so much further as we go to work or school.
And what about medical costs? In 1966 the average daily hospital stay was $28 per day.  Today the average is $2,800.  This is 100 times higher than in 1966… Not 10 times but 100 times more!  This equates to an average annual increase in hospital costs of 9 percent each and every year for the last 50 years!!  This is called inflation. I’ll wager that your income probably hasn’t gone up 9 percent a year!
Consider food, housing, transportation, and clothing costs along with gasoline and hospital costs, and inflation is a big, ugly monster of a problem.
How does this relate to you personally? 
When you get a raise and you feel rewarded with more income, remember, that increase is just keeping you even with inflation… in a sense there is no real increase unless you have been given a phenomenal raise.
And what about taxes? Examine your tax bracket and see that as your income increases, so do your taxes.  The U.S. graduating tax system is designed to go up as you make more money.  So when inflation increases, this forces employers to keep up with inflation and now you have greater taxes to pay.  In other words, the government gets more of your money as inflation occurs.  The government doesn’t have to announce a tax increase, they just have to print more money for gasoline, hospital care, food, housing, transportation and clothing to increase.  We all get so used to this system, we don’t even think about it.
What is the solution?  What can you do to keep this from happening to you?  It does not appear that our government is going to quit spending more money than they have any time soon.  They have been doing this so long they forgot what a surplus looks like.  The only solution I can think of, beside you making more money, is to control your spending and not be like the government.  Save money into long-term accounts that will give you tax-free growth. There is hope.  I have lots of solutions I’d be glad to discuss with you:  peter@moneymastery.com.