How To Combat Inflation With Dividend Growth And Protect Your Purchasing Power

Financial Crisis / Finanzkrise

As you know from my past few posts I’ve been reading Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth. One thing that surprised me a bit was his comments about inflation. The author pointed out that the 60 year average inflation rate in the United States is 4.1%. The book was written 8 years ago in 2006 and has a US focus, so I decided to do some of my own research to see if this figure was still accurate.

What is inflation?

Before I dive into the results, I want to explain what inflation is. Investopedia defines inflation as

“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.” […] “As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.”

The Bank of Canada website has an inflation calculator that you can play around with to get an idea of how inflation affects your purchasing power. Here are a few of my results:

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Credit Card Arbitrage

Making Life Hard One Card at a Time

Credit card arbitrage is when you use a low promotional balance transfer or deposit rate from a credit card and use the money to earn income at a higher rate. This sounds good in theory, but in my opinion for most people the limited returns don’t compensate enough for the added risk and extra time and effort. In today’s low interest rate environment it is difficult to find the higher rates needed to make it worth your time. Let’s take a look at a live example.

Right now (April 12, 2104) in Canada Rate Supermarket is offering a $100 promo when you sign up for either a MBNA cash back card, or a MBNA platinum card that offers a 0% balance transfer for 12 months.

Initially the 0% offer sounds great, but there are a few caveats.

  • While there is no annual fee, MBNA will charge you a 1% balance transfer fee (min charge $7.50) when you make the request, so the 0% offer is really 1%.
  • The second thing to consider is that you have to make the minimum payments each month otherwise they’ll up the interest rate to around 20%. The minimum payment is

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  • Moving Costs & My Spending Philosophy

    Uhaul

    Editor B / Foter / CC BY

    It’s been a busy month for me. I’ve been moving into my new place. Moving in can be a stressful and expensive endeavour, but for me it hasn’t been that bad. Before leaving for Australia, my fiancé and I got rid of a lot of stuff by selling or donating it. Now that we have to move back in, we have to buy it all back. The stuff we kept, we had stored in 4 different places (thank you friends and family ). Having stuff in 4 places made moving a bit more of a headache, but the day went fairly smooth. We were able to borrow a pick up truck and thankfully it was a sunny day.

    I don’t like to spend a lot of money on things like furniture; I’d rather spend money on experiences. Naturally this makes moving in and buying a bunch of stuff difficult for me. I grew up in a frugal family, and those values were passed on to me. I believe in delaying gratification for a greater reward down the line. In today’s society, consumerism has taken a strong

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    Should You Have An Emergency Fund?

    Day 77 - West Midlands Police - Traffic Car c.1985

    West Midlands Police / Car Photos / CC BY-SA

    So, should you have an emergency fund? Yes!

    I would say that most people agree that you should have an emergency fund, but it’s one of those things that keeps getting put on the back burner. For me it took about 2-3 years from the time I actually started thinking about it to put one together. It is hard mentally to save for an emergency because you can’t help but think of all the other things you could be doing with the money. For me it’s been a challenge not to invest it, as I don’t like having money sit in a savings account making 2.0%. I want to buy some dividend stocks! I imagine that others have similar problems, but for them it might be a new tv, car, gadget or whatever is on their mind.

    The next difficulty is saving up the money. I was able to fund my emergency fund in when I sold my car, but for most people they will have to save up over time. Saving for an emergency fund can take a long time especially if you

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    Save Money and Earn More by Asking for It

    Dollar Sign in Space - Illustration

    In order to reach my early retirement goals I have to save a large portion of my income and invest it. Typically I try and save over 50% of my after-tax take home pay. The typical recommend rate is 10% if you start a relatively young age, but I want to retire early so this involves a more diligent savings strategy. To save more than 50% I focus on two areas: (1) Increasing income and (2) reducing expenses. For this article I’m going to talk about a very powerful and often underutilized method of reducing costs or increasing income. What’s the secret? Save money and earn more by asking for it. In many case I’ve been able to save such a high percentage of my income by simply asking for a cheaper price, or by asking for more money.

    Asking for what you want can have surprising results. I frequently ask for things cheaper and I find more often than not I end up getting what I want or close to it. The key here is that you have to actually ask for it! A lot of people get embarrassed by asking for something cheaper, or feel that because

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