Value of a Dollar
With the Global Financial Crisis perceived to be behind us, people are out and about in Australia spending up big like it never really happened here. I suppose it didn’t for a lot of people.
I try to keep an eye on news articles, and forum posts on the Aussie dollar and inflation figures. While I’m certainly not an expert, I’m slowly beginning to understand how things work in this world of ours.
Money is important to everyone during these times. It puts food on our table and clothes on our back. It’s most people’s primary concern, and as a result they want more of it.
My mum was talking to me the other day about her superannuation, telling me how she needed more in there so she can retire comfortably. Already in Australia, super funds have taken huge hits in their returns. Over the last few years people have lost more money than they have made in their super fund, yet we are still all told that we should invest all of our money into super for retirement.
Following the Real Estate Bubble in Australia and the opinions of those who know their economics, it’s very plausible that our country will suffer high levels of inflation in the future. All to support a housing bubble.
So we are all banking on being rich. People invest for the future, so they have more money. Shares, property, super and so on. It’s all so we have more money, later.
The question I ask everyone is, “what is the value of a dollar?”
What’s it worth to you? What will it be worth in 20 years time? Are you banking on being rich?
I tell my mum to plan for the future. In my opinion, she should be planning to have everything she needs before she retires (within reason of course). Planning to have the money to do it later is a dangerous idea. If inflation hits, and the car that once cost $25,000 now costs $100,000, she’s stuffed!
I keep telling my friends who are rushing into the idea of buying a house to take their time and get to it when they are ready. No one will listen because of the free money on the table from the government, and the fact that they want to get in “before the next boom”. They aren’t necessarily making money from a boom. They are making “more dollars”, but not actually becoming wealthier in the long run. While their house is “worth” more and if they sell they will have “more dollars”, everything they will want to buy with those extra dollars will be more expensive. Essentially, they are perceived to be richer, yet everything is more expensive. They are back at square one. Essentially, if their money is making 5% interest, and inflation is 5%, they aren’t making anything. The numbers are just changing.
True financial planning, true investing is beating this situation. You need to make more money than inflation is absorbing.
It’s amazing how common sense this is for most people, yet how completely confused some people are by this information. To some, a dollar is worth a dollar, nothing more.