Guest Post: How Inflation Will Impact Millennials… and What They Can Do About It

My name is CJ and I am a personal finance blogger. I’ve always wanted to help people with their finances. My goal is to help people live their best financial lives. Today, I wanted to write about the subject of how inflation will impact millennials.

I believe everyone should be aware and concerned about it. Many people overlook the potential impacts of inflation. Or they don’t really know what it means. And some just don’t know what they can do about it.

For those who don’t know what inflation is, it basically means the cost of all goods and services increases over time.

For example, do you remember when a pack of gum used to cost 25 cents? If you’re a dinosaur like me, then I’m sure you do. Or when a pack of cigarettes used to cost $2.65 in the late 1990’s. Now they cost over 10 bucks a pack! Thank goodness I don’t smoke. (The only reason why I know this is because I used to work at a convenience store when I was in high school and I would sell a lot of cigarettes.)

But those are good examples of inflation. The products haven’t changed, but their prices have.

That’s what inflation is in a nutshell. In the rest of this article, I’ll show how some of the goods and services that most people utilize on a daily basis have been affected by inflation, so you can better appreciate how inflation will affect you in the future.

And it will affect everyone eventually, especially if you are not aware of it.

Cost of Coffee

I remember when a cup of black coffee used to cost 75 cents. Now you can pay up to $3 for the same cup of coffee at a fancy coffee chain. To me that is insane.

Do you remember those old charity commercials on TV with Sally Struthers? If you don’t, she basically asked people to donate 75 cents a day to her charity, “the same cost of a cup of coffee,” she would say. My good friend Stephen and I would laugh and ask, ‘where the hell can you get a cup of coffee for 75 cents?!’

Seven years ago I would get an Americano (2 shots of espresso with water) at this coffee chain called Joe’s by my office. It was so darn good. This cafe single-handedly got me addicted to coffee. I would go there almost every day to get a cup and you would have to wait on a long line. That’s how good they were. In fact a movie was made called Wanderlust, starring Jennifer Aniston and Paul Rudd. In the movie, they are a couple who purchased a ridiculously expensive tiny studio apartment in NYC, just to be close to a Joe’s coffee shop.

An Americano at Joe’s went for $2.75 for a large cup back then. Today the same cup of coffee is now selling for four bucks! Needless to say, I don’t go there every day anymore. My partner makes coffee at home and I bring it into work now or drink it for free in the office. Doing this potentially saves me $20 a week (80 bucks a month, or $960 a year)!

Having said that, can you imagine how much a cup of coffee will cost just five to 10 years from now? Bad news for you coffee lovers out there. According to the U.S. Bureau of Labor Statistics, prices for coffee were 26.94% higher in 2018 versus 2000.

Cost of Transportation

I grew up in NYC and I still live here. When I was a kid and started taking the subway, I remember it cost 75 cents a ride. Now it costs $2.75. It’s actually not that much of an increase if you compare it to other transit systems in the country, though most New Yorker’s would disagree… We would say the cost keeps going up but the service keeps going down! But I digress.

I never owned a car, but I know the cost of gas fluctuates almost on a daily basis. I also know you could have purchased a brand new basic car for less than $10K when I was in high school. This was a car that had no bells or whistles, where you had to manually roll the windows up and down.

In 2018, the average new compact car costs $20K. And that’s for the cheapest make and model. But I personally would never buy a brand new car. Read more about why here.

What do you think a basic car will cost 10 years from now?

Cost of Technology

I just wrote a post about the iPhone X, and whether or not you can afford it. As we rely more and more on technology, that too will increase in cost. Just look at the iPhone as the prime example. When the iPhone was first released in 2007, they cost 600 bucks for the premium model. Ten years later, they are selling for nearly twice that.

But there are many exceptions within this industry when it comes to inflation. Flat-screen TV’s, for instance. They are always coming out with the latest and greatest in picture quality. And also the thinnest and lightest. Soon a TV will weigh as much a sheet of paper. (OK, maybe not that light, but you get the picture). If you wait a year, that same TV will sell for close to half the original price.

The lesson here is the latest technology will always sell at a premium. If you wait a year or two, you can get that same technology at a much lower price. If you are on a budget, then this is the way to go. If you are trying to save money, just purchase older models of phones and TV’s.

Cost of Housing

When my parents bought their house in 1975, it cost them about $60K. Today that same house can sell for a million dollars. Check out how real estate has increased over the last 100 years in NYC. In 2002, I rented a studio apartment in Manhattan for $1500/month. That same apartment is now renting for $2850.

What do you think the cost of housing will be in another 20 years? If you’ve been reading this far, I think you know the answer.

Cost of Healthcare

This is probably the most important cost because being healthy means everything. At least to me it does.

The future cost of healthcare will greatly depend on what our government decides to do. But I know many people have gone bankrupt or spent their entire life savings on health related costs.

One of my biggest fears is the need to spend all the money I have worked so hard for, saved and invested just so I can pay for the breathing tube that my life will depend on. I know it’s depressing to think about, but it’s also reality. And I believe people should be prepared for it.

Today, the in-office copay on my health insurance (via my job) is $30 to see my primary physician and $50 to see a specialist. I don’t even want to know how much these copays will be 30 years from now when I will need it the most. And this amount does not even include the monthly premium I’m paying right now.

These copay costs may not bankrupt an individual, but it can definitely make a large dent into your hard earned savings.

You also have to consider how much your copay for medications will cost in the future.

What Can You Do to Combat Inflation?

I’ve just listed the most common categories that inflation will impact millennials in the future. Unfortunately, a huge issue is that wages have been stagnant for decades.

If you are in your 20’s or younger, you need to think about inflation because it will affect your age group the most as you will see the biggest price increases throughout your lifetime. But you also have time on your side so you can better prepare for it. There’s really nothing anybody can do to stop inflation. The cost of everything today will indefinitely increase year after year.

In my opinion, the best way to combat inflation is by putting your money into the stock market. The stock market gains will keep up with inflation and your money will grow along with the increase of goods and services. This is why people need to max out their contributions to their retirement accounts. So people can pay for their lattes and breathing tubes comfortably in their old age.

After you have an eight-month emergency fund in place, it’s usually a good idea to pump as much money as you can into your investment accounts and your retirement accounts.

By doing this, you will beat inflation at its own game.