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My friend's house looked fine.

The paint was fresh, the floors were clean, everything felt sturdy — until one day, it wasn't.

It started with some weird pile of dust in the corner of a room. Even after they cleaned it up, it would come right back. And when pest control came to check it out?

Termites. Everywhere. A particularly aggressive species that wasn't effectively dealt with by spot treating. They would have to tent and use three times the amount of gas to kill them.

By the time the damage was visible, the bill to fix it was massive.

"I thought we would've noticed something," she told me. "But it all looked so normal."

That's the problem with termites.

They don't knock things down overnight. They hollow it out from the inside — slowly, quietly — until one day the whole thing starts to sag.

Inflation works the same way.

At first, it's barely noticeable. Your grocery bill goes up. You start spending $50 to fill up your car. (Or maybe that's just the station you picked?) You start cutting back on takeout, not because you want to, but because dinner-for-four suddenly costs as much as it used to for six. No big deal.

But inflation doesn't stop there. It keeps going. Quietly, persistently gnawing at the value of your dollar, just like termites chowing down on your floorboards.

A few years later, it feels like you can barely scrape by on the same paycheck. You wonder how long it's been since you paid less than $100 for a basic grocery run. That six-month emergency fund you worked so hard to build? Now it can only cover four months of expenses, maybe five.

And if inflation keeps chewing away at the value of your dollars, you might get to retirement and find that your nest egg doesn't stretch nearly as far as you thought.

But that's usually the biggest problem with inflation (and termites) — by the time you notice something's off, the damage is already deep.

That's what inflation does. It erodes your financial foundation bite by bite until the moment it's too big to ignore. And by then?

It's not a small repair job anymore. It's a massive renovation.

So What Is Inflation, Really?

In plain terms? Inflation is what happens when your money slowly loses value.

You work. You save. You budget. But over time, the same dollar buys you less than it used to. Economists will tell you inflation shows up in the data as price increases across a broad basket of goods and services — not just gas or groceries, but the whole economy.

Simply put, it's why you're paying $1.50 today for the same can of Coke that cost your grandparents $0.10 in the 1950s. And why the babysitter wants $20 an hour instead of $15. And why your favorite cereal has shrunk in size — but somehow still costs more.

That's inflation.

It's not just that things are getting more expensive (though, yes, they are). It's that your money is doing less. Which means you have to do more — earn more, save more, stretch more — just to keep up.

So where does it come from?

Sometimes inflation happens because demand surges. Too many people chasing too few goods — think stimulus-era spending meets supply chain chaos. Other times, it's because the cost of producing stuff (wages, materials, transportation) goes up, and companies pass those costs on to you. Occasionally, it's the result of global shocks: wars, pandemics, trade policies (and tariffs) that mess with the price of everything from beef to batteries.

And sometimes? It's because the people in charge waited too long to do something about it.

That's why inflation is so tricky. It doesn't look like a big threat at first. It looks like $1.79 eggs turned into $2.29 eggs. But over time, those price hikes pile up. They compound. And if no one acts — or if they act too late — it gets harder and harder to put the genie back in the bottle.

I'll spare you the economics lecture — this isn't about whether inflation is good or bad. The truth is, it's neither. It's simply part of the system. But what makes it worth paying attention to is how directly it can shape your daily finances, from the bills you pay today to the money you'll need decades from now.

Why the Fix Feels Worse Than the Problem — Until It Doesn't

Once my friend found out about the termites, she had a choice.

She could leave them alone and hope the damage wouldn't spread. Or she could do what needed to be done — even though it meant spending $10,000 to tent and fumigate their entire house.

She chose the latter.

It wasn't cheap. It wasn't fun. It killed all their landscaping and made a huge mess. But it was the only way to stop the damage before it got worse.

The Federal Reserve — the United States' central bank — is basically the exterminator in this scenario.

When inflation gets too high or starts rising too quickly, the Fed has one big tool to stop it: raising short-term interest rates on purpose.

This makes borrowing more expensive... slows down the economy... and generally brings prices back into balance.

And this is where people (understandably!) get frustrated. Because higher interest rates don't magically make things better right away — in fact, for many people, it can make things harder. Like the frustration that comes from fumigating your house.

Mortgages jump hundreds of dollars a month.
Credit card debt gets more expensive to carry.
Business loans dry up. Layoffs happen. Raises stall.
The stock market stumbles.

And for what? Just to make sure your money holds its value 30 years from now?

Not exactly.

Here's what happens if they don't act:

Saving gets harder — and riskier. If inflation is running at 6% and your savings account earns 4%, your money is losing value every month. You don't stop saving entirely — you just feel stuck. Like no matter how much you put away, you're never really getting ahead. Some people start chasing higher returns in riskier places — like meme stocks or crypto — not because they want to, but because they're desperate for something that can outrun inflation.

Your paycheck stretches less every year. You might get a 3% raise — but if prices rise 5%, you're still falling behind. That's not just numbers. That's canceling summer camp. Postponing the home repair. Saying no to the little joys that used to fit into your life without a second thought.

Retirees on fixed incomes feel the squeeze first. Social Security may go up with cost-of-living adjustments, but those increases lag behind real price hikes — and don't account for specific spikes in healthcare or housing, which hit retirees especially hard. The budget that worked last year suddenly has holes.

Big goals feel shakier. You want to save for a house — but housing prices are jumping faster than you can stash cash. You build a retirement plan based on today's costs — and realize you may need hundreds of thousands more just to maintain the same standard of living. It's not that planning becomes impossible. It just becomes harder to trust the plan.

Inflation doesn't just make things more expensive. It makes everything feel uncertain. You don't know how far your money will go next month — let alone next decade.

That's why the Fed raises rates. Not because they want to hurt people, but because the alternative is worse. Because the longer inflation runs wild, the more expensive the cleanup becomes. And eventually, you're not just tenting and gassing — you're ripping up the floorboards and drywall.

"Deal With It Now, While It's Still Small"

A few months ago, I mentioned to my friend that our pest control guy had found some early signs of termite activity near the fence line.

Nothing inside the house. No damage yet. Just some indicators that they were in the area and could be moving in.

She didn't even let me finish the sentence.

"Deal with it now," she said. "Trust me. You do not want to wait until it gets bad."

And she's right. Because the truth is, when it comes to termites -- and inflation -- you're better off dealing with it than ignoring it.

And if left unchecked, it just eats away at your financial foundation. And by the time it's obvious, it's already expensive to fix.

That's why the Fed takes such aggressive action — even when it's painful. Because ignoring inflation doesn't make it go away. It just gives it more time to dig in.

And that's why you should care, even if you're not making monetary policy.

Because understanding how inflation works helps you protect your budget, your savings, your future. It helps you recognize what's happening before the rot sets in. It helps you plan for a world where prices don't stay still — and make decisions that hold up anyway.

So yes, it may feel like overkill to keep rates high — or not cut so deeply — when the floor still feels solid. But when you've seen what happens underneath?

You'd rather call the exterminator now.