How inflation affects purchasing power: Ever wonder why things tend to get more and more expensive? Or, from a different perspective, your money seems to be worth less.
I assume that most of you are at least somewhat familiar with the concept of inflation.
Wikipedia tells us that „In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.“
We all know that inflation is real and that it’s happening. Then how come that only a minority of people is actively taking care of their money so it won’t lose its value?
If we assume a 2% yearly inflation rate, the buying power of 100€ today will only be 98€ a year from now. And it’s going to be less and less every year after…
So by simply saving your money you will actually end up losing because of its decreasing value. This is how inflation affects purchasing power.
Therefore I teach my clients how to INVEST properly for an increasing value in the long term.
For a more in depth understanding I recorded this video where I explain how inflation affects purchasing power in more detail (use Chrome browser):
Why you need a strategy otherwise inflation will beat you, and you will lose money even without you knowing it. Watch today's video to know what to do.
Posted by Lukas Xu on Sunday, 26 April 2020