Inflation – Can it Be a Good Thing?

Everyone has heard the term inflation, and most people refer to it in a negative manner. In a sense, it basically means that money is worth less in the future than it was in the past. While this is sometimes true, it is not always the case.

Inflation can be a bad thing, especially for those people that work each day to earn a living and put money into investments. In an economic downturn, these investments can prove to cause you to lose money rather than to make money. In this sense, inflation can be very negative.

So, what are the statistics when it comes to inflation? Inflation usually averages around 4% each year. Basically, $1 today will only be worth about $0.96 the following year. So, over 20 years, things that you buy could cost twice as much as they do today. Paying more for something may seem like a bad thing, but in some cases it can prove to be good. This is especially true when it comes to the real estate market.

Over the past few years most countries have seen a decline, and governments are trying to keep the economy up and going by tossing money out. This can cause a higher rate of inflation, because inevitably the more money floating around, the easier it is for people to get their hands on. If people have more money, they are usually going to be willing to spend more money.

Now, consider your home. Most people take on a mortgage debt and agree to pay it back along with interest. Interest rates may go up and down, depending on the type of loan, but usually home loan interest rates are lower than most of the other loans out there.

Over the next decade, the predictions are that inflation will continue at a higher level than in the past. With that in mind, income will go up and the mortgage payments will probably remain the same. So, while inflation may not always be a good thing, it can prove to be helpful when it comes to your real estate investments.