How you can beat Inflation?

Inflation this word is visible quite often in media (newspaper, tv channel etc.) ,what do you understand by inflation?
 
Inflation is rise (increase) in the average level of prices. Its opposite is deflation, fall (decrease) in the average level of prices. The boundary between inflation and deflation is price stability. 
 
Inflation is increase in the cost of things that are necessary for human being  to live and enjoy life, such as bread, butter, milk, cheese, coffee, oil, home, cloths, education, medical services etc, in comparison with global world it is decrease in rupee cost so that it takes more dollars to buy or to take services.
 
Let us understand inflation more in detail:-
 
Consider the example when I was bit younger petrol price was 25 Rs/- per liter and now it has cross 65 Rs/- per liter. Movie Ticket we use to purchase in 40 Rs/- now in  (2011) we purchase it in 100 Rs/- or more. Gold price was 11000 Rs/- per 10 gm in 2008 while today it is 28000 Rs/- per 10 gm.
Considering target of purchasing 30 gm gold after 3 years, Mr.X has started saving 1000 Rs/- per month from year 2008 for 3 years so his saving will be 36000 Rs/- by year 2011. By end of 2011 Mr. X want to purchase 30 gm gold with this 36000 Rs/- he can purchase hardly 12 gm gold as gold price is 28000 Rs/- per 10 gm. This is real Inflation.
From above example it is clear that inflation can eat away your saving/investment & impact badly on your financial goals.
The rate at which the prices of everything go up is called the “rate of inflation”. For example, if the price of something is Rs.100 this year and next year the price becomes approximately Rs.110 then the rate of inflation is 10%.
It is necessary to beat inflation in order to survive in current economy. Following are way by which one can beat inflation:-
            Don’t keep your idle money in saving bank account or at Home:-
First thing one must remember that money kept in saving bank account or at home except emergency fund is biggest mistake. As money kept at home is not goanna grow it will remain as it is. Similarly money kept in saving bank account will grow at 3.5 % rate while inflation rate is much higher than this. As per current economy average inflation rate is 8-9 %.
Hence in order to beat inflation your money should grow with capacity more than 8-9% , if you are keeping money in saving bank account or at home your money can not beat inflation.
So best way to beat inflation is start investment in instrument which provide return more than inflation rate.
            Plan to purchase Home:-
If you have yet not purchase your own dreams home don’t wait further you may end up spending more money on purchasing same home in future. Consider the history same flat/row house/bungalow at same location which was available in much lower price its price has gone up to very high level.
As home is necessity without which one cannot afford to live it is advisable to purchase home as early as possible. By delaying buying decision of home you are unnecessary inviting inflation to eat away more money.
            Purchase Gold for your requirement:-
Gold is known as sign of prosperity, need to gold varies from person to person. But one common need arise for every person is during his/her marriage in terms of jewelry either to ware or to give it to bride/groom.  For some this need may be less for some may be more.
If you consider history gold price has shown phenomenal rise in past few years. Gold which we use to purchase in 10000 Rs/- is about to cross 30000 Rs/- & inflation rate at which gold price are increasing is very high beyond our control and imagination hence in order to beat this inflation you must plan / purchase gold for your requirement.
For marriage requirement of your child we advise to purchase 1 unit (1 gm) of Gold ETF per month. By doing this you will have dual benefits as this unit are in demat form you can sell it any time at market price & You need not to worry about physical security of gold. As you are purchasing 1 unit every month you have benefit of cost averaging also.
            Plan for your retirement:-
Most important task one must do for beating inflation is to plan for retirement. One must keep track of money spent every month. Based on average money spend every month one can calculate that how much money will be required at retirement age. It is most important to consider current inflation rate while planning for your retirement.
Once you will come to know amount required for your retirement you have to start planning for achieving your aim. Please take help of expert in order to design plan for your retirement.
Plan for your child education:-
You must plan for expense required for your child education. E.g  If you are dreaming that your child should study engineering, than you have to look for current expense required to become engineer and  add inflation in to that amount so that you can reach to amount required for making your child engineer on eligibility date for your child to become engineer.
Once you reach to that magical figure you have start planning for achieving that aim.
 
Conclusion: – From above article it is but obvious that if you don’t try to beat inflation than inflation will beat you’re saving. You must consult financial planner to know impact of inflation on your portfolio.

 

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Article by Raviraj

Hi, I am Raviraj. I am passionate about money matters and finance. I have 10 years of rich experience in the field of financial planning, Investments & Insurance. I have written 850+ article on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

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