Written by M Katie Helle, CPA – – –
Inflation is something most consumers are feeling these days. The cost of living keeps going up, yet their income stays the same for many. It costs more today for everyday living expenses than just a year ago. We are experiencing this at places like the grocery store and even gas pumps.
The inflation we are experiencing today occurs when prices rise due to increased production costs. There are typically five factors affecting inflation: a growing economy, expansion of the money supply, government regulations, managing national debt, and exchange rates. It is easy to say the inflation we are experiencing today is the after-effect of the Covid-19 pandemic. Employers have to pay more to hire workers than ever before as an incentive to come back to work. Production lines were put on halt in many places for nearly a year, causing a shortage in supply. Many companies have to pay a premium for these supply shortages. All of these added costs are then passed on to the consumer. You may ask yourself who benefits from today’s inflation. Typically those who are paying on debts benefit. For instance, mortgage rates are relatively low, meaning those who finance can buy a more expensive house at a lower rate. Consumers with fixed wages are typically hurt during inflation times because their wages do not match the increase in purchasing power.
CNBC International released a short video explaining inflation and how it impacts us as consumers. You can watch the video here: https://youtu.be/FMKMWBqy_EA.
How do you feel about the impact of inflation?
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Katie Helle has been in public accounting since 2009, with experience in individual and small business taxation, specializing in payroll and sales tax reporting and compliance and QuickBooks accounting software. She is an Arizona native and resides in Chandler, Arizona with her husband, young daughter, and two goldendoodles. Outside the office, she is actively involved with community outreach, enjoys fitness, and can be found with a power tool or two in her hand for her many crafts.