Inflation and Your Strategic Financial Plan

As we are watching the Federal Reserve lower the Federal Funds rate to 1/4% and witnessing the Federal Government give away 700 billion tax payer dollars I have encountered many economists (and Dan Green) that are speaking about the fears of future inflation. In this context, I just read an interesting posting called The Inflation Factor written by Doug Short. Posted on the macro economic blog The Big Picture (that I suggest and frequently read), this article is an interesting prospective on how inflation could effect your retirement.

More pertinent to residential real estate, this article takes a look at how inflation affects our individual financial situations. It is very interesting to note how inflation can change your perspective about your home mortgage. As the posting states “…inflation is the main reason why a long-term fixed expense like a mortgage payment goes from a major burden to a minor nuisance.” Inflation is just another example of how purchasing real estate is a part of your entire financial plan. Inflation is market mechanic that no one individual can control, yet it can drastically effect how your future turns out if you do not factor inflation into your entire strategic financial plan.

Note, that Dan Green’s article Explaining What Happened At the Fed (December 16th, 2008) is interesting speculation that the current financial regulation that is occurring in the US will probably keep rates low for the short term, but will also most likely spur inflation that will make rates rise in the long term. This means if you are considering a refinance, now might be an opportune time. If you are considering buying real estate this might also be a window of opportunity.