Time Value of Money (Inflation? Or the "T" word?)

 I went to IKEA last weekend. I had a coupon that was going to expire and because I knew I wasn't going to get the chance to go on Sunday, I stopped by after going to the Japanese Festival. I almost went to Greekfest after but most of us decided to go home. I  decided I'd like to use the coupon now than have it wasted since IKEA was less than a couple miles away and on the way home. I spent $0.75 with tax for a set of dishes and a serving bowl. The dishes were $0.79. I got 11 of them and one serving bowl because I had already purchased one to try out. I wanted to try it out because it is white and I wanted to see if it will stain. It doesn't. So I went back to complete the set. I added the serving bowl because the coupon was $10 off a $10 or more purchase. The serving bowl was $1.99. I got the small bowl-like instead of the small plates because I thought that would be of more use to me. They look like the small plates but with the curve so I felt they would still work for dessert. It's the IKEA Oftast plates and bowls.

photo from Ikea's website.

I actually got what's pictured above but they also have a small dessert plate that's smaller than the one shown below the small bowls. They are really good bowls. Despite the price increase, they are still a fantastic deal and I recommend them. Here's a link for the Oftast bowl on Ikea's website

Well, exactly one week later, I had lunch this afternoon with a new acquaintance, walked around a bit and decided to stop at Ikea again because I got a coupon for $5 of $25. I had wanted to get the serving bowl in another color although it's $2.99 in that color. It's still a steal. I also decided to get an extra chair for my table. I got the chairs for either $19 or $19.99. I don't think the actual price is relevant and what really matters is that it was less than $20. I really think it was $19 because I had $19 in my mind and thought I'd get the serving bowl and a paper towel holder. When I looked online last night, the paper towel holder was now $2.99. I felt I had paid less for it in the past but okay. 

So, after stopping by on my way home since I had to return an item - An item I had bought multiples in the past but the current version has truly gone downhill. I'm not sure I expected IKEA to create something that cheap that I ended up getting something much better from Target. In addition, I wanted something sweet so I got a Froyo after the return and then decided to go get the items I wanted. Well... the chair was $25. I started to wonder if I was seeing correctly. I walked over to the section and it was $25. So in a week, the price has gone up 25%. I decided to walk over to the dishes and they, too, had gone up about 25%. The dishes were now $1. Yay, but a week ago, they were $0.79 each. The serving bowl, which was $1.99 is now $2.49. Fortunately, the colored one I wanted to get is still $2.99. When did the prices go up? I'm going to guess sometime at the beginning of the month. I was there exactly a week ago. 

Had I known they were going to raise most of the prices by 25%, I would've bought most of what I needed although I did buy most of what I needed, thank God. I actually looked at some mugs and they are now $1.99 instead of $1.49. 

The truth is that the prices of items have increased significantly this year. Sometime earlier this year, I noticed a generic increase of about 8-10% on some items I buy at Walmart. The 8% was rice but the rest of the items seem to have a general 10% increase. My guess: retailers split the new increase on "duty" with buyers. But a 25% increase?  In the case of the mugs, the increase is more than 25%. I recall looking at the mugs a while ago and decided the Walmart version is better since it's bigger and about the same price, $1.48. I'm glad I got the coupon because that helped. 

That said, not everything at IKEA has gone up significantly. I was in the As-Is section and saw some baking trays for $2. I looked at them, decided to think about it as I walked around and when I was on my way back, I saw a woman with a young girl talking about how good of a deal it was. She then turned to me and asked if I was coming for them. I told her I looked at them earlier. She took all 3 of them. The lesson is that if you want it, take hold of it. 

The good news is that despite the "25%" increase, the price of the bowl cannot be beat. It feels insignifant with the bowl but if the item you buy goes from $19.99 to $25, You are now paying $20 more for the set of four. 

Which brings me to the Time of Money. The way I learned it is that "a Dollar today is worth more than a Dollar tomorrow". If you've wondered if that is true, look at  my example and you'll realize that the dollar last weekend was worth more than the dollar today because it bought more. Now when I've studied Finance, I went deeper into it and had to work with formulas. I still have my financial calculator. I don't plan on going into details here by spelling out the Time Value of Money formula. I'm not here to prove anything. 

The point is that I would need more Dollars to buy the same items I bought last week. I also would need more Dollars to buy the chairs and other items I bought last week. Essentially, You are paying more today for items than you were last week or maybe in your case, you are paying for more for it than last year. An example is the items at Walmart and other places that have gone up about 10% this year. The coconut water I buy is now $21.98. A 10% increase. I noticed a few things had increased about 10% at Sam's also. While the inflation over the last few years was more subtle, such as sugar going from $2.99, to $3.09 which seems insignificant, a 25% or 30% increase is more palpable and easily noticed over a broad range of items or in the case of big retailers like Walmart, the 10% is also palpable. Oh well...

 Your Dollar took you farther last year than it does now. In other words: your purchasing power has decreased. Whatever the reason is regarding the decrease in your purchasing power ( I'm reminded of Orwell's 1984 so I'm not going to say much here),  has your income increased to match that? Ha.