I’ve changed the by-line on my blog’s headline. I simply changed just one word and by doing so I re-aligned my blog to what’s more of the current reality than any of us would like to admit. I inserted the word ‘sustainable’ in exchange for the word ‘wealthy’. Hard as it might be, not too many people are going to feel wealthy anymore. Me included. One of the main reasons for this decline is inflation. However you want to look at it, inflation is really a tax. And it affects every one of us whether we really are rich or if we’re poor. Our wallet is thinner and getting thinner with each passing day.
Corporate America is going to have their taxes raised. We all know that most corporations don’t pay any tax. Instead, corporations simply raise their prices and you and I pay the taxes. There’s talk that the wealthy (one million and higher) are going to be facing a 43% capital gains tax. So as not to cause a stampede on Wall Street, this tax on the wealthy is going to be retroactive. There will be no escape. The millionaires are going to be taxed higher and heavily. But before you breathe a sign of relief because you’re not a millionaire, the inflation tax will affect you anyway. So will higher gas prices, higher food prices, higher commodity prices and on and on and on. Just this week, meat prices rose by 20% and fuel prices have jumped by 30%. All of this is really a tax. A tax on people like you and me. You may think the solution is to not eat meat or take mass transit but the decline in quality of life will shatter all aspects of life.
“Inflationary factors abound. These include higher labor costs, higher freight costs, higher transportation demand, along with the container shortage and port delays … increased demand in various product categories some shortages, various shortages of everything from chips to oils and chemical supplies by facilities hit by the Gulf freeze and storms and, in some cases, higher commodity prices” are already rampant. Click here for more info.
As part of the American Families Plan, the admin is proposing to nearly double the top tax rate on capital gains and eliminate a tax benefit on appreciated assets known as the “step-up in basis.” Combining the estate tax, the new higher capital gains rate and the repeal of step-up in basis could bring total effective marginal rates as high as 61%, according to an analysis from the Tax Foundation. The rate would be the highest such rate in nearly a century, according to the tax policy research group. Click here for more info.
Many of us saw our wealth decline because of the pandemic. Many of us have lost our jobs. My own husband has been out of work for over a year and was forced to take on early retirement and tap into his Social Security benefits three years earlier than he had planned. That means a permanent decline in income through no fault of our own.
The Federal Reserve’s latest data show that household wealth dropped by $6.5 trillion from the end of 2019 to March 2020 as the coronavirus pandemic started to take its toll. All of this loss came from a sharp drop in stock prices and happened before average Americans saw unemployment soar to levels not seen since the Great Depression. Taking other data on how average Americans have been doing since March 2020 suggest that the real pain to household wealth has only begun. Click here for more info.
As the pandemic is nearing its close, just as we think the worst of these past 15 months is over, every single one of us, try as we might to scramble out of the messes we find ourselves in, will now have to face and overcome a new obstacle: the inflation tax.
I’m not seeking to ascertain or balance wealth anymore. I’m searching more for some semblance of order and a more sustainable lifestyle. How I am going to accomplish that is a mystery to me now. One thing I’ve learned is although I may not be able to plan ahead, it may be best to just take it one day at a time. I rarely watch the news anymore. I’ve tuned out all the nay-sayers and doomsday preppers. In my heart of hearts I don’t think it’s going to be that bad but it is going to be bad in some form or another nonetheless. As the economy changes so will I. My focus has changed. I don’t think this inflationary period is temporary as the admin suggests. I think it’s permanent.
CrisisTimes has a few good tips on how to successfully meet and cheat inflation (click here for more info):
Tips to avoid the negative effects of inflation are only suggestions and don’t constitute any legal advice, therefore you’re free to use your own judgment depending on circumstances, to be more prepared to face inflation effects you need to be aware of those effects, so if you haven’t done so, please read some of them above, here are some tips:
- Be wise when holding cash, whether in your home or in your savings account, if you’re earning 5% interest on the money you have in your bank, and inflation rate is 10% then you’re in reality losing 5% and not earning anything.
- Be careful when buying bonds, high inflation rates completely destroy the value of long-term bonds.
- If you have a variable-rate mortgage, fix it if you can find a good deal, have a low fixed interest rate or 0% interest if you can find one.
- Invest in durable goods or commodities rather than in money. Check out our commodities list.
- Invest in things that you’re going to use anyway and will serve you for a long time.
- Invest for long-term capital gains, because short term investments tend to give deceptive results or sense of making profits while in reality you’re not making profits.
- Learn about bartering which is trading goods or services without the exchange of money (it was very popular in hyperinflation times).
- Manage wisely your recurring monthly bills such as (phone bills, cable TV…), it would help to reduce them or eliminate some of them.
- Same goes with ephemeral items (movies, restaurants, hotel rooms…) they’re not bad if you spend money on them in moderation.
- Ask yourself, do I really need these things I’m spending my money on? Think how much and how often you will need something before buying it.
- Use the money saving tips such as: you need to reduce your consumption of things that are rising rapidly in price (eg, gas) without having to reduce your consumption of goods that are rising less rapidly or even falling in price (eg, clothes).
- Buy only what you need, especially objects that have multi-tasks, and are considered durable goods.
The conclusion from all this is: You don’t have to live cheap, just live smart!
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