The Cost of Living Just Went Up

We have a problem, the cost of living is going up

► Where I Buy Bitcoin

► My Stock Portfolio + Stock Tracker

► Get 2 FREE stocks valued up to $1850 (when you deposit $100)

► MY DISCORD

► Open A Roth IRA

► Follow Me On Instagram

► How I Protect My Bitcoin

My PO Box:

Andrei Jikh

4132 S. Rainbow Blvd # 270

Las Vegas, NV 89103

PRICES ARE GOING UP:

Have you noticed just how much prices have been going up for everything lately? Nearly half of people in the US say that the biggest threat to their financial security is the cost of living and there’s a lot of data I want to show you today. Papa bank - the Federal Reserve just released the inflation data and economists thought we were going to have 4.9% inflation but instead we got 5.4% inflation which is the highest annual inflation numbers we’ve had since 2008.

EXAMPLES OF INFLATION

Take a look at the food sector, it says 2.4% which can be confused as the price increase. Until you click on that to expand it and you see food at home stayed pretty much the same but food away from home increased 4.2%. If you click on all items less food and energy which the weighted average shows is 4.5% - but once you dive a little deeper and see commodities not including food and energy, you see that apparel is up 4.9%, new vehicles up 5.3%, used cars and trucks 45.2%. All significantly more than what is shown.

Rents are another good example of one of the things going up, the CPI data does include shelter into the calculation. Shelter represents 2.6% as a weighted average, but the real increase in rents has been 1.9% for primary residences and 2.3 for owners equivalent rent of residences.

Transportation services represent 10.4% but car insurance is up 11.3%. And if you want to travel, that’s too bad - airplane tickets are up 24.6%.

A PROBLEM WITH THE DATA:

Weighted averages make the true story a little confusing. Let’s say for example that the stock market was included in the CPI - the consumer price index which is how we measure inflation (the CPI does not use asset prices for stocks, crypto or real estate because assets are considered too volatile)

Let’s say the stock market represented 10% of the entire economy, that’s the weighted average and let’s assume the market went up 10% in a single year as it should and everything else stayed the same. What is the inflation number?

The inflation number is not 10% like you’d intuitively think it would be, instead it would show us that the inflation rate would be 1%. Why is that? The market went up 10%!

THE REASON:

Inflation takes into account all the indexes and their relative size to the whole economy and it gives us the average amongst all of them. That’s why when looking at these preliminary numbers and seeing we have 24.5% in the energy sector is confusing, yes technically true but the price increase at the pump was 45%.

WHAT DO WE DO ABOUT IT?

The government wants to step in and rethinking about how we calculate inflation and adjust the COLA.

WHAT IS COLA?

Cost of living adjustment which we created in 1973 to help retirees not get left behind because of inflation. Ever year we adjust the COLA based on the CPI. The higher the CPI, the higher the adjustment.

HOW BAD IS IT?

This year in 2021, the COLA should be adjusted only 1.3% which will represent roughly $20 a month which isn’t that much. Since 2012 the average COLA increase has been anywhere between 0 to 2.8% and it’s estimated that since 2000, Social Security lost almost a third of it’s purchasing power (30%). So over a longer period of time, inflation has outpaced the average social security income.

WHO CARES, I'M NOT RETIRED:

You will eventually be, and if you don't want to get left behind and wait 30 years to have your income catch up to where it once was, you need to start investing.

MY THOUGHTS:

Even though our quality of life has improved, and efficiency/technology has reduced prices - overall prices continue to up faster than our incomes.

Source:

*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.