The Impact of Inflation
By: Connor Diem, LU Peer Financial Coach
Buzzwords are fun, popular catch phrases that are associated with current trends. People often use them in the cohorts with which they are associated, whether it be a school, sport, industry, or even groups of family or friends. When buzzwords are used, they often signal affiliation with a certain culture, with an intent to create excitement and oftentimes provide vision. For us Liberty students, a common buzzword is the Rot. This buzzword doesn’t take long for freshmen or new transfers to catch on to. It brings about a unique kind of anticipation when your friend says, “let’s hit the Rot (Liberty’s dining hall) after class,” giving you and your stomach something to look forward to while you sit in your lecture. Buzzwords are often used by entrepreneurs building their firms to provide a big vision and motivation toward their goals. While it would be awesome to talk about fun buzzwords throughout this whole article, there are always two sides to a coin, and I am willing to bet you’ve heard of a certain word that fits into what I’m deeming the “Dudword” category because it is not exciting, catchy, or visionary.
That word is inflation. You know, that thing that makes everything more expensive. Inflation can benefit you in cases such as your house increasing in value roughly at the rate of inflation (or lately, much more), but generally, the pain of inflation is felt when paying for groceries, healthcare, and other necessary living expenses. The two questions I will answer in this discussion are: how much does inflation impact prices over time? And what can you do to combat inflation?
For the first question, we will be looking at the Consumer Price Index (CPI), which measures the change in price over time for a market basket of consumer goods and services (Bureau of Labor Statistics, 2025). From August 2024 to August 2025, the CPI rose 2.9%. Now, at this rate, how much will the CPI increase over 10 years? Take a look at the chart below.
As we can see, at 2.9% inflation, you would need $130 in 2035 to be able to buy the same amount of goods that $100 would buy you today. This shows a total decrease in purchasing power of 29.34%! To look at it another way, a carton of eggs today that is bought for $3.50 will cost $4.53 in 10 years, representing the same 29.34% increase in price. Now to our next question: what can we do to combat this?
The solution: put your money in places where it grows, thus outpacing inflation. Take, for example, the stock market. While the stock market has many ups and downs, over a long period of time, it has historically averaged an 8-10% return, which means that on average, $100 may very well turn into $110 after one year. Investing grows your amount of money while inflation cuts away at the value of your money. Now, even though it may grow to $110, the impact of inflation will cause that $110 to only hold the same amount of purchasing power as about $107. Let’s take a look at this chart below for a visualization, but this time we are going to let it grow for 10 years.
That same $100, if invested in the stock market, taking an average of historical returns, can turn into $200 after 10 years. Now, it won’t be that cut and dry, as the market will go from high highs to low lows, but over time, the average is about an 8-10% per year return (Royal et al). Inflation will be present regardless, but let’s compare the value of our money with investing versus without investing. Over 10 years, $100 not invested would hold the value of $71 due to inflation, but that same $100 invested would likely turn into $200 while still taking inflation into account!
In summary, inflation is always a threat, eating away at the purchasing power of your hard-earned dollars. But on the bright side, we can invest that money with the goal of growing your dollars more than inflation is eating them. But remember to be diversified, as Solomon says in Ecclesiastes 11:2, “Give a portion to seven or even to eight, for you know not what disaster may happen on earth.”
Sources
https://www.bls.gov/cpi/
https://www.nerdwallet.com/article/investing/average-stock-market-return
