Today’s post is to enlighten us on inflation, how it affects our money and how we can preserve our money from the effects from inflation.
In simple terms, inflation is the general increase in the prices of goods and services in an economy. When inflation occurs, prices rise, and the purchasing power of money reduces. To explain further, it means it will cost you more to buy a same product when inflation occurs.
For example, if in 2018, a bunch of apples cost N1,000 and that same bunch of apples cost N1,500 in 2019, it means that your purchasing power has reduced by 50%. Your N1,000 is still whole with you, it did not reduce, however, the purchasing power has reduced.
The National Bureau of Statistics measures the yearly rate of inflation by measuring the percentage change in the cost of acquiring a basket of goods and services by an average consumer using the Consumer Price Index (CPI).
In an economy with inflation, you can’t afford to remain at the same level of income because the cost of living may increase, and that same income may not buy the same things you could buy before.
To preserve your money in an economy with inflation, you must invest in assets that gives you a minimum return rate as the same as the rate of inflation. Else, your money is losing value. To build wealth, ensure that your investments are at rates that is higher than the inflation rate.
I hope you have learnt/re-learnt something today.
We believe in you!
To your financial independence and freedom.