Being relatively young, I can only begin to observe the long term effects of inflation. I can remember when a stamp only cost a quarter, a gallon of gas cost $1 or so, and when public college tuition cost “only” a few thousand dollars.
But it facinates me to hear my parents and especially my grandparents reminisce about how much cheaper things were when they were younger. They can remember when a nickel and a dime were “real money” which would purchase a whole meal, a gallon of gas, a movie ticket. You can’t buy anything for a nickel today, save perhaps a piece of gum.
Consider these statistics: In 1950 the average income was $3,216, the average car cost $1,350, a stamp cost $.03, and the average house cost $8,450.
Of course that was back when a “millionaire” was something to which few people even aspired. Millionaires were members of the elite wealthy, people who could live a luxurious life of leisure from stately mansions in Manhatten, shopping freely on Park Avene. This fact amuses me when I watch old movies. The idea of a “billionaire” was never even conceived.
It also amuses me when I think about all the average people today who plan and hope to become millionaires (myself included). At least we’re all likely to get there! Money Magazine just published its most recent “Millionaires in the Making” couple – a pair who collectively earn $65,000. They are on track to have $1.3M by retirement, which sounds great until you consider that $1M will be worth only about $305,000 in 40 years (the couple are in their 20’s). I don’t know about you, but I wouldn’t be comfortable retiring today if I only had $305,000 in the bank.
It’s overwhelming (and a little bit scary) when you think about the sheer volume of dollars a young person today needs to accumulate to maintain our current standard of living all the way through retirement (especially considering we’ll all probably live to be at least 125 by then – which I actually read in Time a year or so ago). Do you ever think about how weird it will be when the average home costs $1,000,000, a gallon of gas costs $15, and a standard car costs $100,000 (assuming we’re not all driving hovercrafts by then)? Many of us may see that in our lifetimes.
Of course the average salary will have gone up as well, along with retirement contribution limits. Hopefully we’ll all be saving a lot more. Soon we’ll all be millionaires! At which point the designation won’t mean much, of course–by then the real go-getters will all want to be penta-millionaires, and then deca-millionaires…
More from Meg at The World of Wealth