In our last blog we looked at how inflation is thieving from savers. Here, we look at how you can use inflation to create wealth.
So how can inflation make me wealthy?
First of all if you don’t understand how inflation is robbing you and your wealth then go back and read our last blog.
Inflation punishes savers because increasing living costs erode the value of your savings. At the same time rising inflation also erodes debt. So if you have a debt of £40,000, in time, inflation will erode the value of the debt.
Before I go any further it’s important to explain there are two types of debt, good debt and bad debt. Good debt??? Yes, you can have good debt. Good debt is used to buy assets not liabilities. So for example a bad debt would be a loan to purchase a car, holiday or any other item that costs you money. A good debt would be a mortgage for a cash flow positive, buy to let property.
Inflation and good debt make you wealthy! In 1990 your mortgage might have been £30,000 on a house worth £45,000 which at the time may have seemed a lot. Today a £30,000 mortgage would be seen as a small mortgage especially if that same property is now worth £180,000. The amount of the debt is the same but because of inflation the debt has lost value. This table makes it easier to see
So you have two choices let inflation take away your wealth or use it to your advantage. The choice is yours…