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Planning your retirement

Part 3

In Part 1, we wrote, "What is stealing your wealth?" asks Robert Kiyosaki.  His answer is debt, taxes, inflation and retirement.  In the first 2 posts we touched on taxes and debt.

So, now we move onto “inflation”.  The key question is what can an individual do about inflation?  The answer lies in the consumers response to the concept of saving money in order to make a purchase.

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The issue of inflation makes savers losers for two reasons.  First, the consumer is unable to save faster than the rate of inflation.  Second, the amount of interest paid by the banks for a savings account does not rise with inflation, so the money made on a savings account is actually shrinking.

Contact us today and we can help you formulate a “spend plan”, otherwise known as a “budget" in order to hedge the influence that inflation can wage on the household expenditures.

In this post we briefly touched on inflation as a thief, but what about the last wealth thief?  Stay tuned to find out more!

First, let's discuss the consumers approach to making a purchase.  There are two ways to make a purchase.  The first method is to save the money, then make the purchase.  The second method is to use credit to make the purchase.  In the blog post, "Planning Your Retirement part 2" the issue of debt is analyzed.  We can’t use debt, so that is right out!

The first thing to discuss is what have we done in the past to hedge inflation?  The problem with inflation is that it is totally out of the hands of the consumer.  Prices are rising and the individual consumer feels like there is nothing that can be done to stop inflation.  Well, there may be a remedy, since inflation is usually a response to supply side economics.  Meaning that if there is sufficient demand, the price will rise, but if there is no demand, then the price will fall.  In other words, if we stop buying something, then the price will fall.  But what happens when inflation is happening to something that we cannot do without, like groceries?

If inflation is raging through the economy, we change our purchasing perspective and the consumer in us decides that we need to buy the new refrigerator NOW, before the prices go up.  The problem that inflation inflicts on the consumer is that any interest earned through a savings account, is negated by inflation.  Even now, inflation although moderate, is growing faster than ANY savings account interest rate.

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