4 ms·

>Why would expenses need to track less than inflation, if your wages are tracking with it? Because wages don't go up in real time so you get robbed of the diff

>Why would expenses need to track less than inflation, if your wages are tracking with it? Because wages don't go up in real time so you get robbed of the difference for the duration. You make $3. Rent costs $1. You have $2 leftover to improve your life, pay down debt, whatever. You make $3. Rent is now $1.50. You have $.50 leftover Your wage goes up to $3.50. Rent is now $2. You have $.50 leftover. Repeat a bunch of times. Your wage goes up $.50 again. Rent stops rising in price. You have $1 leftover. See how the inflation robs you of $.50 multiplied by the duration?

chgs 2y ago
You make $3, rent costs $1, you owe $300, it takes 150 to repay your debt Inflation doubles everything You make $6, rent costs $2, you owe $300, it takes 75 to repay debt The person so wealthy they lent you money loses out, you gain.
- caseysoftware 2y ago
  If that's universally true, why would lenders lend in a high inflationary environment?
  - _yb2s 2y ago
    The interest is usually still more than inflation, they just make less money- and the alternatives for them are either cash, which loses more, or investments that are higher risk and more volatile.
  - chgs 2y ago
    Because they lose more if they just stick it in a box under the bed.
_yb2s 2y ago
If you get an annual cost of living adjustment, presumably it is ahead of cost half the year and behind the other half which averages out. Rent usually updates annually also. If all other debt payments are effectively decreasing, you’re just doing better. It only feels psychologically worse when you notice food prices going up steadily and you have slightly less left over than you did last month. People will still be mad about that even if actually ahead.