Lifestyle Inflation killing your Wealth

in LeoFinance3 years ago

Few months before I have written about "Inflation is the Biggest Enemy of your Investment", though this was about the generic Inflation which is around 5% to 6%. When we think about future goals, we have to take Inflation into account to know how much we will need in the future to accomplish our goal.

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In India, RBI publishes the current inflation rate every quarter and thus we take into account that to get the future value of the amount needed. To keep it simple, Rs 100 now will be less than Rs 100 in a year, because whatever you are purchasing from Rs 100 now, you have to pay extra to get the same item after a year or so. That is what inflation is all about.

We say that inflation is the silent killer of wealth and that is true to some extent. But I would like to add one more point to it, that is about Lifestyle Inflation. Because of so many advancements in technology and so many things to buy today, few lifestyles expenses may be NEED for someone whereas WANT for others. So it all depends on person to person. So that means only considering RBI inflation rate for our financial calculation is the biggest myth, because for some that inflation might rise two times because of his or her lifestyle whereas for some it might not be that much because again of his/her lifestyle.

When you have the money you might think of investing as well as spending on the items you always wanted to have. For example, I could have bought a normal 100-125cc bike for Rs 60000 but I opted for Suzuki Gixxer which is 155cc and cost me around Rs 100000. Now tomorrow if I have to buy a bike, I would opt for something better and thus it will cost way too much and thus this is all about Lifestyle expenses which can shoot if you don't keep a tab on it.

I am not saying that changing your lifestyle is bad. It's better to improve your lifestyle when you want. The only thing is that we need to take that lifestyle inflation into account when we are thinking about our goal for the future.

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There are few ways to beat lifestyle inflation and that is:

  1. Invest where the probability of returns are more than 8% to 10% in that way we are not beating the generic inflation but also have enough wealth to beat any lifestyle inflation if we have.

  2. Invest more, now this is the obvious thing. If you want more money in the future you have to invest more.

If we cannot do the above things, we have to reduce our lifestyle spending and thus stay away from getting the latest gadgets or getting a better bike or car or a bigger house.

In my view, we do have to take care of generic investment to plan our future money whereas along with that we should keep in mind the lifestyle inflation which can badly affect the future value of your goal.

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I love it especially because you are talking in Ruppe terms. You know your Rupee is not declining as bad as in some other countries besides you get more interest in your banks but yes, inflation is eating up the savings so spend your money wisely!

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I am just thinking about the future...it's not declining now but it will decline in a faster rate in coming days

This, has just opened up some deep thinking in me. Turns out we're contributors to inflation. It is our act of demand and quality expansion in taste that drives prices of goods higher. When foreign products are highly demanding just for quality and expensive taste, the odds are, inflation kicks in on local currency as demand over spills foreign productions and local nations economy becomes vulnerable to the exchange market.

These are the biggest players, and one more reason the government will keep printing money to sustain their greed as though the taste of its citizens keeps going haywire and that posses a threat to their finances.


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When foreign products are highly demanding just for quality and expensive taste, the odds are, inflation kicks in on local currency as demand over spills foreign productions and local nations economy becomes vulnerable to the exchange market.

That might be true but the reverse is more often the case. Globalization flooded the world with cheap products. This pushed prices down for many mass produced items. It is why China became a global leader. Through low labor costs, it was able to produce items for less than most any other country.

These are the biggest players, and one more reason the government will keep printing money to sustain their greed as though the taste of its citizens keeps going haywire and that posses a threat to their finances.

"Money Printing" is done to offset deflation. That is something you should be thankful for. If not, you would have a deflationary spiral. This might sound appealing until you realize that Japan went through the same thing the last 30 years.

Not a fun place to be.

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That's absolutely true, it happened in my country where the foreign mobile phones companies entered into a low level and thus taken up the whole market share. Whereas the local manufactures could not keep up. This is where the inflation will surely hamper us in the long run

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The best ROI is on money you do not spend.

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Not only do not spend but invest in assets