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Consumer Price Index - Where's the Buying Power? | Project38LB

Updated: Sep 17, 2019

This week I began with Real Estate Finance homework on Consumer Price Index. I loved the research so much, I thought I would share with you.

The Bureaus of Labor and Statistics is a great informational resource. The economic news posted to the website is updated constantly. If you have not explored it and you invest in US real estate, I suggest you book mark the site. Take the time to read the home page and economic news tables before you invest. It will give you a better idea on the current economic factors and risks of real estate investing.

There is an inflation calculator as well. Which is an amazing tool and fun to plan more like wish for the perfect financial outcome.

In my homework, I calculated two amounts over a 58-year period of time. In each scenario, the amount does not change the buying power percentage for that year. Except within the years 1926 to 1939 when buying power was a negative. All the other years do have positive outcomes. When grouped in 5-years increments it is possible to find the highest percentage shifts. (This is the link to my spreadsheet with two amount projections over 58 years in 5 years gaps). It is amusing to think of the possibilities.

Here is my financial wish, transport me back to 70’s with a $1,000,000 and some bell bottom jeans! Who would have guessed the buying power would range from 38% to 49% for close to 15-years. I would not care about the horrible gas rationing at the time. Who would? Your buying power increased at the end of the day no matter what you did, even wasting the day to buy gas.

Between 1970 to 1980 a $1,000,000 had $380k - $490K of buying power. From 1980 -1985 is turns to and small $210K - $250K. Even in today’s dollars, I could live a very nicely on quarter of million. Simple asset list is 1)no debt, 2) primary residence @ $350k, 3) income property @ $350k earning 3% cash on cash return, and cash bank deposit of $250K earning 12% 4) a blue Chevy Camaro

(American Made) @ $11k, depreciated and worthless in 10 years.

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