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How Inflation Will Impact Personal Debt

4/27/2022

1 Comment

 
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How Inflation will Impact Personal Debt 

If you’ve been paying attention to the news, you know that the inflation rate in the United States is higher than it’s been in decades. Currently, the annual inflation rate for the United States is 8.5%. This is the highest it’s been since 1981. 

It’s clear that inflation affects goods and services, but if you are trying to get out of debt, you may be wondering how inflation impacts personal debt.

Inflation is the decline of purchasing power that a given currency has over time. The effects of inflation tend to be a rise in the cost of goods and services, essentially reducing the value of a dollar.

Generally speaking, inflation can have a positive effect on personal debt. If your wages are increasing with inflation and you have been carrying a debt balance, you may be one of the few people who actually benefit from inflation. If you are in the fortunate position of earning more income while making the same monthly payment on your debt each month, then you’re ahead of the game! Keep in mind, this would only benefit an individual with a fixed rate of interest. If your interest rate rises with your wages, then you likely won’t see the same benefit.  

However, one especially important consideration is that with inflation, cost of living increases. When the cost of products and services increase (and they will, if they haven’t already), you better hope that you get that wage increase! If your wage increase doesn’t exceed the rising cost of goods and services, then it won’t matter that the cost of your debt is cheaper because you will have a difficult time paying it down in the first place! 

Inflation is on the rise and breaking records, but it isn’t all bad news if you can leverage your employer for that long coming wage increase!  Inflation has also been known to increase the value of tangible assets and reduce the cost of liabilities.

If you are interested in reviewing your budget and customizing a debt repayment plan that you can afford, contact Golden State Debt Management to speak with a knowledgeable and experienced debt relief counselor.


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1 Comment
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10/16/2022 01:20:24 am

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