$1 Million vs Inflation
A quarter of a century ago $1 Million Dollars would have gotten you alot more than today simply because of that dreaded word – INFLATION!
But the problem is, most people will not notice inflation eating away at your money. Why?
- it’s sneaky and creeps most of the time,
- department stores have sales which make people forget about value for money,
- marketing ads reduce our perception to assuming profit is what causes inflation,
- short memory – people live only for today and forgot yesterday,
- banks’ lending assures inflationary pressures on money,
- stock market structuring encourages inflation through upward price mobility.
So, I could go on and so can you…if we all paid attention to it. As a comparison, I thought I’d create a what a million bucks could have bought 25 years ago versus what it would cost despite the deflationary recession today.
1) A semi-detached bungalow in one of Singapore’s prime districts will cost you over $5-6 million today (but in truth, you won’t likely find one for sale).
2) A retirement. Living on the expected interest of about $100k after taxes can get you a decent lifestyle with annual travel. You’ll need about $6 million or more to achieve that today. (Of course, some money management geniuses will tell you different until a Madoc like situation of a wall street melt down occurs…).
3) The million will buy a Rolls Royce, two Ferraris, a Land Rover, a Mercedes 600, a chauffeur and perhaps a Go-Kart for Junior all in a garage. Today I’ll settle for a Ferarri and a BMW in my garage. (Yes, garages cost money too.)
4) Downpayment for a small private jet in 1984. Today, downpayment for a used small private jet.
5) Send 5 kids to the top world name Ivy League University including room, board, pocket money and annual trips. Today, you send them through that University and they pay their way.
6) A 2 bedroomed Manhattan condo suite (offered to me then). Can’t find it – it’s part of a giant development with multimillion-dollar suites even smaller than the one 25 years ago.
Why is understanding inflation necessary? In time, inflation eats away at the value of our money. If you’ve been planning your retirement based on having $1 million, factor in your purchasing power by the time 25 years rolls around.
* Can you still afford to even live a retirement lifestyle?
* And then factor in maintaining the lifestyle you have chosen.
* Will that money be enough to generate the residual income you need?
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[...] 2) Inflation that eats away at your money. The value of your savings + interest – taxes; will likely mean you are not getting ahead of the value of money you had put into the bank after a number of years…read more. [...]