Posted by mybudget360 1-27-15
People have a hard time understanding how inflation erodes their purchasing power. Little by little the cost of everything goes up and people simply assume this is normal in an economy. The $2 movie ticket becomes a $8 movie ticket. That can of tuna just got smaller but the price remains the same. The cost of going to college went from manageable to needing large student debt merely to complete a four year degree. Inflation is argued to be a purely monetary outcome. You have too much money, in the form of cash or credit in today’s case, chasing fewer goods. In our current economy, debt is the fuel accelerating inflation. You can see this in items like housing, cars, and college where debt is the primary fuel driving prices higher. The big problem today is that incomes are simply not rising fast enough to keep up with the rise in other expenses. Over time, inflation has a big destructive power. I thought it would be useful to look at the cost of typical items in 1938 and compare them to where things stand in 2015.
Comparing 1938 to 2015
Over a year ago, we looked at some old data and found this to be useful to readers. I thought it would be helpful to update the data and see where things stand today in 2015. Someone sent this snapshot of the cost of living in 1938. It really is fascinating looking at inflation over a very long period of time. In this case, we are looking at spending pre-World War II. Most Americans probably have no sense as to what the cost of living was back then since they are mired in the fight of living paycheck to paycheck.
Take a look at the cost of living in 1938:
What is important is to look at income in relation to the cost of living. A new home was about twice the annual average income. Today, with the median household income being $50,000 and your typical new home costing $298,000 we are definitely on the more expensive side (6 times annual income versus 2 back in 1938). Look at the new car costs. A new car cost about $860 or half of annual income. Today, a regular car can cost $32,000 and most will need to finance it. Tuition to Harvard was $420 per year and today Harvard tuition is nearly $62,000 with room and board:
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Peter Janisch specializes in short sales in Short Sale Realtor. I am your Short Sale Realtor Short Sale Specialist Realtor and Short Sale Realtor loan modification and distressed property expert. This article and content is for general informational purposes and may not be accurate. This should not be taken as legal advice, technical or tax advice under any circumstance. Seek legal advise and representation in all legal matters.