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The one question that determines your future wealth

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Inflation is an inherently personal thing. We quantify it in general terms with headline figures, but don't be fooled. Inflation isn't the same for everyone.

In Ireland, the inflation rate has fallen over the past few months from 9.6% in July to 7.7% in December, but this doesn't mean that everyone's life is now 7.7% more expensive.

How inflation affects you will differ depending on your age, location, job, savings and investments.

There will be winners and losers: net buyers and net sellers.

Let's take an example.

You bought a house before 2020 vs. you're looking to buy a home in 2023.

For those who bought pre-2020:

Initial fixed rate at 3% or lower (many of these will be approaching their fixed rate cliff)
Up to 40% increase in home value since purchase
Your mortgage repayments have remained constant while the value of your home has increased dramatically.

Yes, you're paying more for eggs, but your debt as a percentage of household net worth is considerably lower.

You're wealthier now than you were before the pandemic, in both absolute and relative terms, due to the inflation tied to your most significant asset.

Over two thirds of the Irish population have a mortgage or own their home outright.

For many of these, inflation has been a net positive due to the housing effect - a wealth-creation event.

For those looking to buy a home now, the past three years have created a very different scenario.

Wealth destruction

According to the Central Statistics Office, the average house price index has gone from €293,000 to €359,000 since 2019, an increase of €66k. Mortgage rates are now starting to increase. This is set to continue as the ECB looks to raise its deposit rate to 3.5%. (ECB rates were negative in 2019). As such, recent inflation has had a materially negative impact on both the purchasing power of the savings accumulated to buy a house and the future debt burden that the mortgage represents. The same inflation. Two very different outcomes.

The property divide

This is the very essence of how wealth gaps materialise, playing out in real time at an accelerated pace.

Many factors drive wealth inequality in Ireland, but it's bizarre to think that the side of the wealth divide you find yourself on may be determined by simply asking the question.

Did you own a home before the pandemic started or not?

With 70% of Irish wealth tied up in housing, the wealth effect of rising house prices is particularly strong relative to the rest of the world.

Remedies

Don't just listen to the headline numbers. Figure out how inflation is affecting you personally.

Are you being crushed by rising prices, or are you a net benefactor as prices increase?

Everyone isn't on the same boat here. The sooner you realise this, the sooner you can do something about it.

Want investment advice and personal finance tips that won't bore you to death?

Join the one thousand plus subscribers by scanning the QR code or go to www.theislandinvestor.com.

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Seven An Post staff retire

Seven well-known staff members at An Post Killarney celebrated retirement this week. The staff, Mary O’Sullivan, Joe Clifford, Paudie Cronin, Joe Coffey, Tom Ashe, Jerry McCarthy and Dan Murphy were […]

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Seven well-known staff members at An Post Killarney celebrated retirement this week.

The staff, Mary O’Sullivan, Joe Clifford, Paudie Cronin, Joe Coffey, Tom Ashe, Jerry McCarthy and Dan Murphy were treated to an night of celebration and reminiscing by the South Kerry branch of the Communication Workers Union of Ireland.

The retirees, their families and colleagues enjoyed an evening at ‘The Panoramic’ the newly named restaurant upstairs at Killarney Racecourse.

Ollie Favier, of the Shire fame has taken over responsibility for operating the coffee shop / restaurant at the racecourse.

“A beautiful venue and apt that Ollie’s father Dan RIP from Glenflesk, was also a long serving postman in the community,” said John O’Shea, the Union Secretary An Post Killarney.

“The night included music with Derry Healy and Rosie Healy and was attended by up to 80 people, under the attentive guidance of Sales and Marketing Manager Emma O’Connor and Ollie’s right hand man, Colin Daly

“The event the food and the atmosphere was a great success and credit to all Ollie’s staff for being great hosts. “

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Watch Video: Primary School Students share knowledge from Coffee Cup Project

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Killarney primary schools have joined the crusade against single use coffee cups this week by joining the Killarney Coffee Cup Project and declaring themselves single use coffee cup free. The Killarney Coffee Project is a community grassroots project aimed at eliminating single use coffee cups from Killarney town centre to protect Killarney National Park and the towns surroundings all in the name of conservation.

Alan Oliver, a local coffee shop owner, Lir Café, who is one of the participants of the project has said that he is “thrilled to see the project extend into the local schools. Teaching young people about why we should be moving away from a throw away culture is imperative to the continuous success of projects like this. Today’s young people are the future custodians of this town and so educating them on the importance of sustainability will ensure that Killarney and its National Park will be in safe hands for future generations.”

The schools involved in declaring themselves single use coffee cup free include Holycross Mercy, Gaelscoil Faithleann, Presentation Monastery, Glenflesk, Knocknanes, Coolick, Loreto, Lissivigeen and Tiernaboul. This follows on from the Killarney Coffee Cup Primary Schools Initiative which took place last November supported by Killarney Credit Union, the Kerry Biosphere, and the IKC3 project in MTU.

In November the 5th classes in the Killarney area were brought to Muckross School House and Killarney House for a 2-hour immersive environmental education experience around our connection to the Kerry Biosphere and citizen climate action. Here the students learned about our biosphere and how we as citizens and sustainable initiatives like the Killarney Coffee Cup Project can protect this Special Area of Conservation. Finally, they went outside to work with a park ranger, collecting acorns in leftover disposable compostable cups that the project had gathered from various businesses. They took these acorns back to their classrooms where they have planted and are caring for their oak tree. In 2024, these young oak tree seedlings will be planted back into the National Park.

The Killarney Coffee Cup Project is the 1st of its kind in the world, and it is something that belongs to all the citizens of the town. We all own this!

Want to hear from the future voices of our environment?

This week the Killarney Advertiser caught up with primary schoolers who have been busy learning all about protecting our amazing natural environment

Watch our video where the future eco-warriors share what they’ve learned about keeping our Killarney healthy and thriving! Here is to the next generation of environmental stewards!

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