Inflation makes your money worth less. What you could buy with $100, 3 years ago, you definitely cannot buy as much today. So, how can you counter inflation, and stop your money from being worth less?
Since your money today is worth less what it was worth several years ago, then maybe you should consider investing it. Don’t spend it or hide it in your sock drawer. There are many places to put your money into, you just need to know which one. It isn’t just about investing per se, but finding the right investment so that your money could grow, and not disappear all of a sudden.
Some of the choices in investing are real estate, business, mutual funds, Forex, or in a saving fund. If you want to be conservative, you can just put your money in a Time Deposit, and let it earn interest slowly.
The first rule in investing is to make sure that the rate of inflation is not higher than the rate of return.
To understand this, you need to know what the rate of inflation means. Inflation is when prices go up, and they will – over time. There is not much of anything that becomes cheaper as the years go by. Everything becomes more expensive on the average. The rate of inflation is knowing how much they will increase.
Let’s suppose you bought a pair of shoes for $100, by this time next year, the same kind of shoes will cost $110. This means that the rate of inflation was 10%. This will be your guideline in investing your money. You have to make sure that the money you will make on your investment is higher than the rate of inflation.
You have to keep checking what the rate of inflation is because it is constantly changing. The government will let you know what this rate is.
How then can you know what the rate of return is? Simply put, this is how much money you make on your investment after a certain period. Let’s say you invested in stocks worth $100. After one year, if these stocks are worth $150, then you made $50 or a rate of return of 50%.
This means you have to choose where to invest your money. The higher the risk, the higher the return, if you make money. In banks, the rate of return is very small, but you have the confidence in knowing that your money is safe and insured. There are other investments like the Forex which can give you higher rate of return, with a low rate of inflation, but you need to be on top of your game all the time, because a foreign currency can turn 180 degrees at any given moment.
As you can see, inflation (and taxes) will eat into your profits, especially if you do not invest it. If you need advise, there are so many money managers and fund managers that are affiliated with reputable banks and investment firms who can help you find a venue for your money.
However, relying on them 100% is always not a wise choice. You will still need to keep checking on them for updates. There have been instances when fund managers have run off with their clients’ money – even in highly dependable firms. It happens, and one way you can avoid losing everything is to invest your funds in different avenues. It’s called hedging in some circles. You should find our more about it.
Read Also:
QUOTE OF THE DAY:
“A safer way to hedge against inflation is to buy Treasury Inflation.” – Andrew Lucas
Best Reading:
- Is Insurance Worth It?
- How to book tata nano
- Credit Card Scam Can Happen To You
- Every Recession Cloud Has A Silver Lining
- Get Approved For Credit Card
CONCLUSION:
Find a way to save money, but to be financially savvy, you should consider investing your savings so that it will make money for you.
