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When we hear the word inflation we often feel it is a bad thing. The very hearing of the word can make us shudder. Inflation can mean that we pay more at the pump and more at the grocery store than we paid last month and scare the stock market beginners. The truth of the matter is, however, inflation may not always be bad. In fact, we depend on inflation for our properties to grow in value.
The following example shows how inflation can actually be helpful.
Jack and Sue bought a starter home in 1990 for fifty nine thousand dollars. Their payments, including insurance and taxes were four hundred and fifty dollars per month.
In 2006, the home was appraised at two hundred ten thousand dollars. Due to increases in taxes and insurance the payment for the home had increased to five hundred ten dollars.
In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.
Bob and Marie list the property for sale, but it does not immediately sell. The market for real-estate quickly turns sour and they watch the value of their home drop. Eventually it is appraised at one hundred thirty thousand dollars and they decide to wait to sell. Although the payment remains constant, they are no longer seeing the benefits of inflation.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property.
The following example shows how inflation can actually be helpful.
Jack and Sue bought a starter home in 1990 for fifty nine thousand dollars. Their payments, including insurance and taxes were four hundred and fifty dollars per month.
In 2006, the home was appraised at two hundred ten thousand dollars. Due to increases in taxes and insurance the payment for the home had increased to five hundred ten dollars.
In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.
Bob and Marie list the property for sale, but it does not immediately sell. The market for real-estate quickly turns sour and they watch the value of their home drop. Eventually it is appraised at one hundred thirty thousand dollars and they decide to wait to sell. Although the payment remains constant, they are no longer seeing the benefits of inflation.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property.
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