Inflation Tax

Is there a $100 bill in your sock drawer? Then you’re suffering from the dreaded “inflation tax”: the Jaws of money.

Inflation tax is a colloquial term that refers to the lost money due to inflation from holding things like cash, fixed income, and fixed-rate bonds. As inflation rises, this erodes the buying-power (as in, the actual value) of your money. If your money isn’t keeping up with inflation, you’re losing money.

Think about it: inflation basically means that prices are rising all around you. That $100 might be able to buy ten $10 chocolate bars or one pair of amazing shoes today, but as the prices of those things go up and your $100 stays $100, your ability to buy those things with that same money...diminishes.

Inflation eroding your money isn’t fun. Inflation tax is like the tax of the invisible hand of price increases...so keep your eye on your money and inflation rates to make sure you aren’t getting hit with inflation tax too hard.