MARKETPLACE
NEWSLETTER
PAGE 4, AUGUST 30, 1974
How To Protect Yourself
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From Inflation
If you earned 125,000 last year and earn 130,000 this year - you'll break even. That's
because the 15,000 increase is necessary just to cover today's rate of inflation. To show
improved earnings over last year, you have to earn more than 130,000. Silllilarly, a firm
reporting "same earnings as last year" actually, according to today's rate of inflation,
has earned 1'zl, less than last year.
If you're drawing the same salary out of your business as you did last year, like 1500
each week, you're actually getting $440 per week. Today's rate of inflation hae eroded that
S500 by 12,'. If your firm's money is in a checking account that draws no interest, your
money has lost 1zl, in value so far this year.
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If most of your money is invested in equip't on locations, which is the one way you can
battle inflation, then 1?f, of the take is being lost to the present rate of inflation. In
short, i f your share froll a collection is 150, actually you're getting $44, inflation eats •
up the difference. From this $44 you've got to pay all the expenses of maintainiDg that
118Chine in the location. If you can achieve to 10;( gross profit, you earn S4.40 before taxes.
Since you must aatch today's 1zl,
earned last year, you require a $12
Actually, when you remove that $12,
basis, you're taking off S6 of your
rate of inflation to earn the same aaount of money you
"service charge" off the top of each 1100 collection.
if you're still splitting on the antique, outworn 50/50
money, 6% of the S100, and S6 of your location's share.
The S10 "service charge", as recommended here for some years now, no lonpr actually covers
today's annual inflation rate. Up until last year, when the rate of inflation ended up at
just about CJ!,, the $10 "service charge" averaged out to cover you. Remember, if you had 50
machines on location, the 110 "service charge" brought you $500 per week or $26,000 per year
to cover all the highly inflated costs with which you were faced.
What you really require is the very same thing leading banks are doing today. They use a
"floating interest rate" to protect themselves from inflation. That's why they went up to
1~ for their prime loan rate for very big borrowers, not for you. If you adopted the 8&lll8
principle for your "service charge" you should, today, deduct $12 from every S100 check you
mail to your locations and mark this deduction "inflationary interest" in thehope that it
may become tax deductible as an interest charge for your locations.
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Should the rate of inflation go up to 14~ this 3rd quarter, to match this higher rate of
inflation you would have to float upward to deduct S14 from every $100 check you mailed to
your locations. If, instead, inflation falls t o 10;( in the 3rd quarter, your "floating eel'-
vice charge" would remove $10 from each S100 check you mail to your locations as their share
of the commission from the income of your machine located on their premises. You're 1111ch
better off mailing commission checks.
So that when "Marketplace" urges you to arrange for a $10 "service charge" off the top
of every collection, which is actually 15 of your aoney and S5 of your location's share, the
purpose of this plan was for you to get S1,000 per week or $52,000 per year it' you operate
100 machines and, thereby, help protect you from today's roaring wild inflation.
What do you think? Write now!