By steadily eroding the value of the dollar, inflation will, over long periods of time, drastically reduce the purchasing power of the dollar, and thus seriously affect long-term financial planning. One example of this problem is pensions, which are discussed above. Another is life insurance planning. The essence of life insurance is to provide a sufficient amount of money to be invested to provide the survivor (say, widow) with enough investment income to live reasonably well. Suppose that a widow, age 32, invests the $200,000 of her husband’s life insurance benefits so as to earn $20,000 per years of interest income. While this may seem quite comfortable, inflation of 9 percent per year will reduce its purchasing power to $10,000 by the time she is 40, $5,000 when she is 48, and $2,500 at age 56 – one-eighth of its original value.
What can be done about this? By planning for far greater pensions and life insurance, this effect can be offset – but few people can afford to put aside that much out of today’s income for tomorrow. Consequently, most people cannot protect themselves against this problem, and remain very vulnerable to inflation over the long term. By eroding the purchasing power of money, inflation undermines the role of money as a store of value, making it difficult to plan for the future and to provide for protection against future financial risks. Rather, inflation encourages short-term thinking: “Spend, don’t save, and let the future take care of itself.”
CBC News – Consumer Life – Concerns raised about furnace company’s …
http://www.forexforexforexforex.ryeglasses.com/
Related Websites - How to be a Money Strategist to Reach Your Financial Goals (Part 2) How to be a Money Strategist In Part 1 of this article, I explained that I was a "money strategist." Then, using the financial goals agreed on by me and my wife, I discussed how money strategies and money tactics work together in a personal...
- Sunday Money Madness Sunday Money Madness is your guide to the rest of the blogosphere on personal finance. The Digerati Life had a guest post from a HandyMan. Remodel Your Bathroom! Try 3 New Ideas To Freshen Up Your Bathroom is a excellent use...
- How Much Do I Need To Retire? The following post is from Todd Tresidder. Todd retired at age 35, publishes the FinancialMentor blog, and lives in Reno, Nevada, with his wife and two children. His ebook, “How Much is Enough to Retire?” reveals the problems behind retirement...
- Links: Back in Boston Edition This week I'm taking a vacation and seeing family and friends in Boston. I had gotten to the point where I really liked the San Francisco area. I didn't realize how much I missed Boston. I got very emotional driving...