Why is life so expensive? How do people afford it?
Look around you and you will see people buying nice expensive homes, nice expensive cars, going out for dinner at nice places, buying nice clothes and other things and you think how can people afford all this? It’s expensive?
In this article I will explain why everything is so expensive and how people are purchasing it all.
Number one is inflation, what is inflation? Inflation is when the government makes more money and puts it into the economy increasing the money supply in the economy which makes prices go up.
Why does the price of things go up when inflation goes up?
Imagine you are on a small island and the total money on that island is $100. A can of coke on the island cost $1. Now let’s say the government added an extra $100 to the island so the total money is $200 what happens is you’ve increased the total amount of money relative to the price of the can of coke which means the can of coke is worth nothing now but what actually happens in real life is the cost of the can will go to $2 to reflect the price in the economy now that is has $200 total if that makes sense.
Inflation goes up around 3%every year so what happens is the price of houses, goods and incomes go up over time as well.
In the 60s a coke was probably a few cents today a coke is a few dollars this is because of inflation.
If you have cash money in your bedroom and don’t put it in the bank or investments to keep up with or beat inflation then over time the purchasing power of your cash with be less and less.
This explains why people think they are making money when they put savings in the bank but really you are keeping up with inflation if you’re getting 2% and inflations 2%. But it’s better than losing money if the account gets no interest.
So with inflation the cost of everything and your salary will go up and up and up over time.
But how can everyone afford nice stuff? Well its simple, they look like they can afford it but they can’t because they are buying everything on credit.
They buy things with borrowed money and borrowed time. Money that you will have to pay back later with interest on top and pay pack later with time that you will have to work to pay back that money. borrowed money and time.
This is main reason everything is so expensive. A house is 400k and a new car is 40k because of credit. Over time everyone is borrowing ahead to purchase these things and this causes the price of them to go up. If everyone competes against each other to purchase a house the highest bidder wins and that was borrowed money.
If everyone paid off all their debts tomorrow including mortgages, personal loans, credit cards and everything else what would happen is everything will reflect the true value again. For example a 400k house might only be worth 100k or something like that. Because when you take away the credit system prices will go back to what they would be before people were buying it “ahead of time”
After the great depression everyone was cautious about spending money and going into debt but it’s been a very long time since then and now everyone is spending their money on going out, getting into debt, buying everything on credit.
This causes everyone to be slaves to their jobs and the credit system.
Another reason why life is expensive is because a lot more women have entered the work force so you have 2 incomes and 2 people on credit applications now so for example if only men were buying houses their income would be x amount and the amount they could borrow would be x amount and house prices would average say 200k but now days women work and they buy together with their husbands or whatever so house prices will average 400k or whatever.
So it’s built into the system. A single person will have to pay 400k for a house because the double income buyers have priced houses at 400k now.
So that is why life is so expensive. So what do you do about it?
You need to get very financially comfortable otherwise it will be a struggle for you. So how do you do this?
Keep expenses low. You might be able to get credit and afford the repayments on a 600k house with a 60k car and more stuff but live below your means and only buy a 400k or less house and a cheaper car. What this will do is free up your surplus income so that you can pay down debt faster and get comfortable faster.
Also try to increase your income. The income the more comfortable you will be and you can pay down debt faster.
I have plenty of more information on my site about how to manage your money.
The financial information in this article and the rest of my site is general only as I am not a qualified professional.
So that’s it guys that why life is expensive and how people are affording everything (they are in debt) and how you can become financially comfortable in this system.
Thanks for reading. Here are some links to relevant articles on my site.