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Know what is inflation and what it can do to your money

Know what is inflation and what it can do to your money!

When does an object increases in value, and when does it lose its price?! Is it easy to answer? Yes, it is!

Let’s get this clear. Anything that’s got a huge availability, or one that’s easy to found, doesn’t cost much. Anything that’s rare is costly.

Compare some random objects like Iron and Gold, Pebbles and Coals, Lions and Dogs, Chickens and Lambs, and so on.

 

Supply and availability is the very general idea that determines an object’s worth.

You can pretty well say that if pollution level keeps on rising the way it is right now, then probably after a few centuries, oxygen and water will become the costliest substances on this Earth. Pheewww!!!

That’s too much to take in, is it?

Here’s the answer; “Inflation” is not something that happens due to an external force. It’s us, the humans, who created currencies, divided lands, assigned values to objects, and hence suffer imbalances in what this world can offer! This imbalance between supply/availability, and demand/necessity is what we may call inflation.

 

As per economical terms, inflation is the rise of prices of any object, good, or commodity. Deflation, on the other hand, is just the opposite!

If by any chance next year, the farmers see a huge increase in jute cultivation, then prices of jute goodies will drop!

This is how the market works. It thrives on the availability and rarity of products!


What causes inflation?

Very difficult to say! There can be many factors. Natural calamities or disasters, civil war, lack of labors, low supply of products, a sudden increase in demand of a certain object, an abrupt increase in cash flow from reserve banks, and anything that creates a scarcity in an object’s supply or increases drastically the object’s demand!

 

Why can’t the reserve banks print more notes to fight inflation?

It’s not bad to think like that! I mean seriously, why can’t they just keep on pumping cash?

Well, there’s the problem. Most of the goods that we have, I mean those that have physical or economical existence (bonds, funds, etc.) are limited! On the other hand, the money we have will become endless!

Ultimately what happens is, you are left with extra money after purchasing a good and the money becomes useless! Or the product, you are after, increases in price, as there’s more demand since everyone’s after it because all have the cash!

That’s when inflation occurs!

But throughout the ages, as we know the poor is dominated and the rich get richer while the poor get poorer! That’s because, those who are smart enough to track inflation and those who have the money, buy extra commodities before the market hits inflation! It, in turn, increases the demand because more products are purchased and that results in an increase in the price of the product.

Now the poor can’t buy the product as they still don’t have the money. Plus the price of the product has also increased!!!

What to do then?!

Well, according to the words of Jim Morrison “We could plan a murder Or start a religion.

 

What Inflation can do to your money?

Money itself has no intrinsic value. It’s worth something because we believe so! Else it can only be used to warm ourselves on a cold winter night by burning them!

No matter who says what inflation can’t be stopped! Our needs are increasing and the only thing that’s becoming cheap is technology! Rest everything is skyrocketing!

Believe it or not, inflation is going to take over you savings sometime soon, if you can’t find ways to increase your amounts!

But one relief is there that with huge rates of inflation, all forms of savings accounts receive higher interest rates!

Still, you can’t rely completely on that as there are exceptions and anomalies!

So invest!
Yes, investment can only save you. Your money should always be working and be a part of the circulation. Hiding it underground will only get useless unless your money’s made of gold or silver or platinum!

The more it is a part of the circulation, the more is it influenced by the rise and fall of inflation!

 

Footnote: Don’t forget to consult a financial advisor and see what investment options are suitable for you! Also, savings accounts are a part of investments. Always keep one or more savings accounts open. This means bank accounts and not cash stashed under your pillow!

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Lifestyle habits that can save you huge amount of money

Sometimes the difficult thing of money saving habit is just how you can start the habit itself. It is really very difficult to find out easy ways to save money and how you can use your savings to reach your financial goals. So, let’s discuss few basic tips that can help you to develop a realistic money savings habit.

  1. Make a list of the expenses

The first step would be figuring out the amount of your spending. Keep track of all your expenses. This may include the cost of newspaper, coffee/snacks, etc. After getting the data, categorize them according to their total amount. You can use your credit card or bank statements as reference.

  1. Plan a budget

Once you have the idea of your monthly spending limit, you can execute a budget and try to fit your expenses into it. Apart from your monthly expenses, you must also consider expenses that occur often but not regularly. These may include car maintenance cost, home renovation, etc.

  1. Make a strategy on saving

After planning the budget, try to put away 10–15 % of your income as savings. If you save money every day as well as reduce your fixed monthly expenses,  very soon you’ll be able to build up a good saving habit.

  1. Choose a goal to save for

Try to set a goal. You need a specific target for which you’ll cut off expenses and save money. Figure out how much time you need to save for it. If you need help figuring out a time frame.

These are some examples of short- and long-term goals:

Short-term (1–3 years)

  • Emergency fund (3–9 months of living expenses)
  • Vacation expenses
  • Down payment for your bike or car

Long-term (4+ years)

  • Retirement investments
  • Child’s education
  • Down payment for your new home or any remodeling job

If you’re saving money for your child’s higher education and your retirement fund, then you may invest your money in IRA or a 529 plan. These investments might come come with risks but they also give you good, compounded returns if you plan properly.

  1. Initiate automatic saving

Almost all banks offer automated transfers between your checking and savings accounts. You should decide the time, the amount , and the account where you’ll transfer the money to. You can also divide your income between your checking and savings accounts. Automated transfers are a great way today to save money as you don’t have to twice about separating money into two accounts manually.

  1. Keep noticing your savings

Check your progress every month. Keep eyes on your checking and savings account. This will not only help you to stick to your savings plan but it also helps you identify and fix problems quickly.

These easy tips to save money will be very helpful to you and will inspire you to build a good money saving habit.

 

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11 Habits you can practice to save more money in your 20s

Twenties is the right time to practice good financial habits. Because, at this age every one should prioritize their finance in order to make a smooth financial life. If you’ve a habit of spending more than what you earn, it would be really difficult for you to fight with debt. The major reason that people incur debt is because they don’t know how to live within their means. If you have a couple of credit cards in your hand and indulge into heavy shopping without thinking about future consequences, then you’re in trouble. Once you fall in debt, you’ll realize how difficult it is to get rid of it. It is better that you start building new habits to become a money saver.   My article can give you some suggestions.

Financial habits you can build in your 20s

Here are the 11 habits that can help you stay financially independent not only in your 20s but throughout your life.

1. Set up a goal

You should have some reasons to save money. Think what do you want? A home, financial independence, getting rid of your student loan debt . Take your first step and achieve one by one. Your desire will inspire you to save money and thus you can build a good money habits as well.

2. Give yourself a deadline

Always fix a date by which you can meet your goal. This will give you a push to save money. Think about your goal once a day. Thus, you can avoid big expenses and stay within your budget.

3. Create budget and modify accordingly

Budgeting helps you spend less than what you earn. This helps you to save more as well. As you expend less and save more, you incur less debts and even if you do incur some, you’ll have the money to pay those off. You’ll have to make a list of your income and your expenditures in order to create a budget . A budgeting calculator can help you prepare your budget. If required, you’ll have to analyze and also modify the budget from time to time as per the changes in your income and your expenditures.

4. List items of your requirement

At the beginning of every week you should list the names of items you would require throughout the week. This list should only include items of necessity and not luxury. You should then visit the mall once a week to buy things you’ve written down in that list. You should remember to carry the list with whenever you go for shopping.

5. Use cash for shopping as much possible

One of the major reasons why young people get into debts is credit cards. When you’ve a credit card in your hand, you can barely resist the temptation of buying anything that catches your fancy without thinking whether or not you at all need it. Instead if you use cash for purchasing,   you would not be able to spend much even if you want. This is because you cannot carry too much cash always.

6. Stay within your means

You’ll have to change your style of expenditure in order to save money. That is, you’ll have to become more disciplined and lower your expenditures as much as possible. In addition, lower the usage of credit cards as these incur higher debts.

7. Make a habit of using coupons

Coupons are a great way of saving money. You can collect coupons from newspapers, magazines and even some websites which allow you to download free coupons. Thus, you can use these coupons to buy items on discount. Talk to your parents or elderly persons to get some information about couponing.

8. Make your own food always

Eating out, ordering food or buying lunch can make your pocket considerably lighter. It is better you skip eating out except for those very rare occasions when you want to go for dinner in a restaurant to celebrate anything. You should also carry brown paper bag to office so that you don’t need to buy food.

9. Set up an automatic savings account

Set up an automatic savings account to avoid spending money on something else. You can ask your employer to directly deposit a certain amount of money from your salary into the savings account. Pay yourself before paying others. Start small with just 1%-2% of your salary. Once it becomes a habit, you’ll see how fast your money grows.

10. Fight with debt

You should work on your financial obligations as soon as possible. The sooner you pay off your debts, the quicker you can start saving money. Try to pay the high interest debts first. Try to fix your credit card and student loan debts now.

11. Give priority to your career

Take your job seriously because your profession will give you a smooth financial life at the age of 30. A good job is always a steady source of income. Work hard and acquire advanced skills in order to stay financially secure in the long run.

Bottom lines

Try to learn more about banking, investing, handling finances and so on. Read journals and financial magazines. Visit good personal finance websites and follow financial market on TV channels. These all are good habits you can build in your 20s. Thus, you can discover your own ways to deal with money as well.