Money in, money out · Module 10 of 10
When the money itself shrinks
How to protect your money when prices rise fast: what to buy ahead, and what inflation does to your debts and your pay.
Key terms in When the money itself shrinks
- Hyperinflation
Hyperinflation is an extreme, runaway rise in prices that quickly destroys the value of a currency. The International Monetary Fund describes it as price growth of 1,000 percent or more in a year. Because prices can multiply many times within a single year, the same pay or savings buys far less by the end of it.
Source: International Monetary Fund, Inflation: Prices on the Rise
- Nominal income
Nominal income is the amount of money a person earns in current dollars, with no adjustment for changing prices. A paycheck that stays the same in nominal terms can buy less once prices climb. Statisticians compare it with real income to show whether pay is keeping pace.
Source: Bureau of Labor Statistics, Income and the Consumer Price Index (CPI)
- Real income
Real income is a person's nominal income adjusted for inflation, so that it reflects how many goods and services the money can buy. The Bureau of Labor Statistics calculates it by dividing nominal income by a price index ratio. When prices rise faster than pay, real income falls even though the paycheck looks unchanged.
Source: Bureau of Labor Statistics, Income and the Consumer Price Index (CPI)
Every term on Lever is in the money glossary.
About this module
When the money itself shrinks is part of Money in, money out, one of 15 subjects in Lever. It’s a short run of 5 lessons, about 13 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Money in, money out
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1
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2
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3
The size of a life after work
How much of your income to keep for later in life, and why your working years are the easiest time to build it.
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4
The pension that's already being built for you
What the pension deductions on your payslip are buying you, and what changes if you claim early or keep working.
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5
The costs retirement doesn't warn you about
The retirement costs people forget: relying on one income, what a partner is left with, and health costs that rise later.
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6
When there is no wage
Managing money without a regular paycheck: cash income, gig work, months with nothing coming in, and making savings last.
7 lessons -
7
When the plan stops matching the month
What to do when your budget stops matching real life, including when it’s the budget that needs to change.
6 lessons -
8
Tracking without obsessing
A simple tracking habit you’ll keep, a quick monthly review, and how to stop a raise from quietly disappearing.
6 lessons -
9
Everything you own, minus everything you owe
Your net worth: everything you own minus everything you owe, and why watching it over the years tells you so much.
6 lessons
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