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Action Plan 3 for Financial Well Being - Know what is inflation and how it impacts YOU

 Inflation is in simple terms cost of living increase over previous year.

For example inflation what government publishes periodically CPI is say 5% that means government is officially telling us overall prices are increased by 5% compared to last year. In reality common person know the actual inflation we is facing everyday at ground will be much more than official figures .

Another point , the education and medical inflation will be mostly in double digits.Do a  quick fact check what you paid for your kids school fees last year vs this year and any medical expenses happened last year vs this year. you will agree to my point

How can we use this data

1.When we plan some thing for future be it school fees, car ,home buying you need to factor this. More importantly you need to factor this in your retirement planning for you pension income after 15/20/25 years away. Think what is prices of common things like Milk,Rice,Bread,Egg,Petrol etc 15/20/25 years before.

2.Check your existing ongoing investments  returns - Are you getting more than the "real inflation" ? Atleast you need to get Inflation +2 % returns to stay ahead of the curve, else you are getting poorer automatically.

Remember  - "Inflation" is silent wealth killer.