10 Years Ago

I have an old IRA from my very first job.  I got an end of the year statement email and looked back at the value from 10 years ago.  I was pleased to find the IRA had doubled in value.  Note, I never added or subtracted a penny to this account since then.  There are two ways to look at this:  1) the number is misleading because I'm calculating after a huge stock market rally.  or, 2) that time period included the great recession.  Regardless, this was the time I was alive and working, so doubling money over ten years seems pretty cool.  But then I got to thinking...is that money actually any more valuable?

Cost of things then versus now --

2002 - Bought a Subaru Impreza - cost - around $20,000
2014 - Subaru Impreza still costs around $20,000

2003 rent in SF - $1000 per month
2004 rent in LA - $750 per month
2014 rent in LA - $925 per  month

(this would be significantly higher if I upgraded or had to rent a new place.  there are many factors in rental costs and maybe my rents have stayed low because i'm downwardly mobile)

2004 average cost of lunch - $5-6
2014 average cost of lunch - at least $10

2004 average cost of shirt - $35-40
2014 average cost of shirt - $50-60

2004 - cost of leather jacket - $300 range
2014 - cost of leather jacket - $300 range

2004 - cost of everyday shoes - $100-200
2014 - cost of everyday shoes - $60-200

2004 - drink at bar - $3-5
2014 - drink at bar - $5-9

2004 - gas per gallon - around $2 per gallon
2014 - gas per gallon - near $4 per gallon

2004 - movie tix - $8
2014 - movie tix - $12-15

2004 - movie rental - $3
2014 - movie rental - $1-3

This is just off the top of my head, but my basic impression is that very few things have doubled in price.  Gas and food, really, are the only costs I've noticed going way through the roof.  I imagine housing costs did the same, but I don't know much about those.  And obviously, you can spend more on items should you choose to upgrade.  If you wanted to buy a nicer car, you could easily spend $40,000.  Or a bigger place, you could spend as much as you want on rent/mortgage.  But my point is that, for the same things, costs haven't gone up commensurate with investment yield.

This leads me to believe if you can invest in the stock market over the long run, you are increasing your spending power.  Of course, if you are forced to sell at a bad time, this does not apply.