So this article is a sequel to our quest in squashing financial fairy tales, after revealing average returns as a financial myth in the first article.
In this article, we will explore how stories are weaved in the facts of inflation rate, market changes and tax brackets. Nevertheless, today, the financial industry usually uses CPI figures to determine the price of goods and services without regard for consumer preference. As a result, cPI says that price of personal computers has fallen but more and better PCs are produced. This is where it starts getting very interesting. This increases the propensity to consume PCs. Our desire and preference to get better computers can actually cause us to spend more, while the comparable rig today can cost half of what it did in the past. Our expenses increase in spite of lower inflation.
Thus, to correct this, we ought to focus more on our personal rate of inflation which is more specific compared to CPI which is generalized. Here, we should base this personal rate of inflation on how rates for goods and services will change given our tendency to consume, kinds of goods types consumed and when we consume them. Then again, we can better manage our finances and get rich more easily, with more indepth calculations in these fields.
Let us now a lot of financial planners today only give figures like stocks have risen on average of 12percent per year since 1929 to justify the profitability of the investments they sell. It’s on the basis of the assumption that there’s no market change available.
Here, if you add a hypothetical negative 12 return on 1 of the years within a 30 year investment you make, your investment can easily shrink by 20 and I believe the majority of the advisers selling investments would not tell you this.
Given the proliferation of such lies, it becomes reasonable to know why the rich gets richer while the poor gets poorer. Loads of financial planners also like to leave out the possibility of higher tax brackets when they advise you to live cheaply while increasing your income. It’s not financially smart since tax rates constantly change and are usually on a rising trend, in order to me. Fact, as long as of this they are basically teaching them to pay more taxes when the income of their clients increase, when these consultants advise their clients to live below their means. These people remain poorer even when the income they earn increases without knowing why.
in conclusion, after exploring how ridiculous these financial fairy tales are, Know what guys, I hope readers now see the light. Discard these old and useless beliefs to embrace a brighter future! On top of that, in conclusion, after exploring how ridiculous these financial fairy tales are, I hope readers now see the light. Discard these old and useless beliefs to embrace a brighter future!