Different people have different goals in life. Some want to enjoy their life daily. Some want to make a difference in other people’s lives. Some want to earn lots of money. Whatever it is, many people are so busy with their work or job, and they have forgotten their goals in life. Not only that, they are so busy with their work that they have become ignorant to one important fact of life. This one important fact of life is INFLATION.
Some still cannot grasp what INFLATION really means. Google gives me this meaning, in economic term, INFLATION means a general increase in prices and fall in the purchasing value of money. I am going to illustrate with a simple example, a decade ago, one bowl of fish ball noodles cost me only $2, but now the same bowl of fish ball noodles costs me $3.5. Within a decade, the price of a bowl of fish ball noodles has gone up 75% (increase in prices). Therefore, the $2 we had last time, assuming we have kept this $2 note safely under our bed till now, we are no longer able to buy one bowl of fish ball noodles with that $2 note (fall in purchasing value of money).
Does it make sense now? As a matter of fact, inflation is not going to go away and you must be wondering right now how much you have lost over the years? Let us do some calculation to find out the answer. These assumptions are made:
- Starting with $100,000
- Annual Inflation of 3%
- Over a period of 10 years
The conclusion of the above calculation is that the initial sum of $100,000, over a decade, our $100,000 has lost a substantial amount of its purchasing value and now the same $100,000 is only worth of about $74,000. This means you have lost $26,000 by keeping your money under your bed. This amount of lost money – $26,000, let me put it into perspective, it can help pay off a university student’s 3 years tuition fees.
INFLATION may sound counter intuitive at the start, but that does not mean it is not possible. As a matter of fact, INFLATION is secretly devaluing your money. In my next post, I will be sharing with you all some ways to counter INFLATION. Stay tuned.
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