Understanding Inflation
Inflation is the silent wealth destroyer. It reduces the purchasing power of money over time. Your investments must beat inflation to create real wealth.
Inflation Formula
Future Value = Present Value × (1 + Inflation Rate)^Years
Impact on Common Expenses
| Expense Today | After 10 Yrs @6% | After 20 Yrs @6% |
|---|---|---|
| ₹50,000/month | ₹89,542 | ₹1,60,357 |
| ₹10 Lakh (education) | ₹17.9 Lakh | ₹32.1 Lakh |
| ₹1 Crore (house) | ₹1.79 Cr | ₹3.21 Cr |
⚠️
Real Returns Matter
If your FD gives 6% and inflation is 6%, your real return is 0%! Always calculate returns after adjusting for inflation.
How to Beat Inflation
- Invest in equity for long-term (12-15% returns)
- Own assets that appreciate (real estate, gold)
- Avoid keeping excess cash in savings accounts
- Increase income faster than inflation
- Review and adjust financial goals annually