Inflation: The Invisible Hand in Your Wallet
September 5, 2023 | Written by Alisha Chowdhury | Est. Reading Time = 3 mins
So, you just got paid and are feeling on top of the world—time to splurge on those new kicks or that smartphone you’ve been eyeing, right? But wait, have you heard of inflation? This invisible force can slowly erode the value of your money over time, impacting everything from your daily spending to your loans and even your money sitting in the bank. Let’s break it down.
What Is Inflation, Anyway?
Imagine last year, a cup of coffee cost you $3. This year, it’s $3.30. That’s inflation in action. It means the cost of goods and services, like your morning coffee, gas, or even your Netflix subscription, gradually goes up over time.
How Does Inflation Affect You?
Your Money in the Bank
You know that $1,000 you’ve had sitting in a savings account for a year? Due to inflation, its purchasing power—the actual stuff it can buy—shrinks. So if inflation is at 3%, next year your $1,000 can only buy what $970 could today.
Spending Habits
Inflation also means that delaying certain purchases could cost you more later. The game console you want might be $300 today but could rise to $315 by next year if inflation is at 5%.
Taking on Loans and Credit
Remember, inflation impacts interest rates. When inflation is high, the interest rates on new loans and credit cards can also go up. If you’ve got loans with variable interest rates, those rates could climb too.
Making Wise Money Decisions
Invest, Don’t Just Save
Let’s get real: a standard bank savings account won’t outpace inflation. Consider diversifying your savings into investments that offer higher returns. Just remember, investing also comes with risks.
Be a Smart Spender
If you know the price of something will skyrocket due to inflation, and you’ll definitely need it (like college tuition, for example), plan and budget for it sooner rather than later.
Look for Fixed Interest Rates
If you’re taking on loans, try to lock in a fixed interest rate. That way, even if inflation causes interest rates to rise, yours will stay the same.
Wrapping Up
Understanding inflation helps you see the bigger picture of your financial health. It’s not just about how much money you have, but how much that money can actually do for you. The more aware you are of inflation, the better you can plan, budget, and make choices that keep your money working for you, not against you. By making wise financial choices today, you can better navigate the rising tide of prices and keep your financial boat afloat. And remember, you don’t have to go it alone—there are apps and resources to help guide you through these complex money matters. Stay smart!✌️
Disclaimer: Our blog is for informational purposes only, you should not consider any such information or other material as investment, financial, or other advice. Nothing contained on our Site constitutes a solicitation, recommendation, endorsement, or offer by Mongo App or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction. When investing your capital is at risk.
