You know when you’re at a grocery store, pick up a fruit, and think to yourself, “when did pears start costing $17 each?”

That’s inflation, baby. Inflation is like a sneaky thief that slowly steals your money’s value, making EVERYTHING more expensive.

Don’t think it’s a big deal? Check out this inflation calculator and see how much the value of $100 has changed in just 10 years.

But what is it, why does it exist, and how can you stay ahead of it?

Let’s break it down.

What/why the hell is inflation?

Inflation happens when prices for goods and services go up over time. It’s not always bad—some inflation is normal and even healthy for the economy. Think of it like this: as people earn more and businesses grow, prices naturally rise.

But why does it happen? There are two main reasons:

1. Demand-pull inflation: When demand for something (like housing or electronics) is higher than supply, prices rise.

2. Cost-push inflation: When the costs of making goods go up (like raw materials or wages), businesses pass those costs to consumers.

For example, during the COVID-19 pandemic, supply chain disruptions made it more expensive to produce and ship goods. That led to cost-push inflation. At the same time, government stimulus boosted demand for many products, creating demand-pull inflation. Double-whammy!

Don’t the evil central banks made inflation?

Great question, my fellow anarchist!

Central banks, who control a country’s money supply, do a have a major role in controlling inflation. They can buy government bonds to “print money” and increase inflation. OR they can raise interest rates to reduce the money supply and reduce inflation.

So why would the central banks want any inflation?

The answer is balance. A small, steady amount of inflation—typically around 2% per year—is healthy for the economy. Here’s why:

• Encourages spending and investment: When prices rise gradually, people and businesses are more likely to spend or invest their money instead of hoarding it. Because with inflation, the money sitting in your bank loses value over time!

• Reduces debt burdens: Inflation makes old debts (like mortgages) cheaper over time in real terms as the interest payments are fixed, easing the burden on borrowers.

• Signals a growing economy: Moderate inflation often reflects increasing demand and economic activity.

However, when inflation gets too high or too low, it can create problems.

In June 2022, America’s inflation rate hit 9.1% - this highest level since 1981! Things were becoming way too expensive way too fast.

So why does inflation change over time?

Inflation isn’t constant. It depends on factors like:

• Economic growth: A booming economy often brings higher demand and higher prices.

• Global events: Wars, pandemics, or trade issues can disrupt supply chains and spike costs.

• Central bank policies: Institutions like the Federal Reserve raise or lower interest rates to control inflation. Higher rates slow spending, while lower rates encourage it.

In the 1970s, for example, inflation in the U.S. hit double digits due to rising oil prices and policy missteps. Compare that to recent years, where inflation surged due to supply chain issues and post-pandemic recovery.

Is inflation the same for everything?

Not all prices rise equally. You might notice that eggs are more expensive, but your Netflix subscription doesn’t really change. Why? Some industries, like food, are more sensitive to supply shocks, while tech or streaming services often have fixed costs.

Inflation also varies across countries. For example:

• In Argentina, hyperinflation has led to skyrocketing prices.

• In Japan, inflation has historically been low due to slow economic growth.

This diversity is why global events don’t affect every country—or product—the same way.

How can I protect my $$$ against inflation?

1. Track your spending: Boring, I know, but it’s actually helpful. By understanding how much you spend regularly, you’ll be able to pick up on things that are getting expensive and adjust accordingly.
   

2. Invest: Cash sitting in your account becomes less valuable over time. Sure you may be able to collect a small interest rate, but sometimes this doesn’t even beat inflation!

But what to invest in? There’s a few things, depending on how much risk you’re comfortable with:

Low risk: Treasury inflation-protected securities (TIPS). These are a type of US government bonds that are lined up with inflation so they always stay ahead, but you don’t get much growth beyond that.

Medium risk: Gold. This has been used as a store of value for thousands of years! Because it has a limited supply (unlike money), gold is good at holding its value over time. Just look at how much gold it has historically taken to buy a house in the US:

Higher risk: Stocks. Over the long term, stocks have grown in value faster than inflation and gold, but can be more volatile.

I still hate it

I get it, inflation may feel overwhelming, but look at it as a motivator to get on top of your finances!

By making smart choices—tracking spending, investing, and staying informed—you can protect your finances and thrive, no matter how prices change.