Inflation and financial planning
February 29, 2008 3:54pm CST
Inflation is the increase in prices as a result of overheated economic growth or too much capital in the market chasing too few oppurtunities. Inflation hurs the standard of living because we have to pay more and more for the same goods and services. If your income doesn't increase at the same rate as inflation you will find your standard of living declining even though you are making more.Also,inflation doesn't impact everything equally,so that some things such as gas prices can double while other things like your home may lose value.Inflation is very bad for retirement planning because your target will have to keep getting higher and higher to pay for the same quality of life. In other words,your savings will buy less and less, so you will need to save more and more. However,everything you buy today costs more, so you have leff left-over income available to save. Inflation has another bad side effect, once people start to expect inflation, they will spend now rather than later,because things will only cost more later.This consumer spending heats up the economy even more,leading to further inflation, this situation is known as spiraling inflation because it spirals out of control. It is also important if you are holding bonds or treasury notes. These fixed price assets only give you al fixed return each year. Based on the above impact of inflation, do you think that financial planning is necessary to curb inflation ????
1 Mar 08
Of course financial planning is necessary in all areas of our life. Lack of it will cause many troubles in our personal life, family, and with our relationship with others. As Robert Kiyosaki puts it, "financial education is a gift more than money."
1 Mar 08
I do agree with you financial planning is necessary in all areas of our life. We do come across with people who are debt ridden and do not plan well before taking credit. A proper advice to them would not only help them in preventing them from possible debt trap but also makes them realise the importance of taking wise decisions at the need of the hour.