How Does Inflation Impact Our Life?

Dear Reader

A report just released on 5th Dec 2007 by DBS Group Research shows that price pressure is rising rapidly along side strong economic growth. CPI inflation in Oct07 shocked the market with a 3.6% YoY jump and the outlook is set to worsen in the months ahead. Annual average inflation will rise to 4.0% in 2008 from 2.0% in 2007. Despite higher inflation, the central bank will be apprehensive towards further tightening due to growth concerns.

Inflationary pressure has built up substantially amidst strong economic growth and is now beginning to show up in the headline inflation number in a big way. Risks of further acceleration in the price level are mounting and the inflationary outlook is set to worsen in the quarters ahead.

The current high inflation faced by the Singapore economy is the result of a confluence of factors. Externally, high food and crude oil prices are serious concerns while domestically, escalating wages and rentals are making things a lot trickier for policymakers.

Food, which forms the largest share of the CPI basket (23.4%), went up by 4.3% YoY in Oct07. Recent releases of the Domestic Supply Price Index (DSPI) and the Import Price Index (IMPI) for food suggest that the worst for food inflation is not over (Chart 2). Food DSPI and IMPI, which represent the domestic prices of basic food ingredients rose by 10.3% and 10.9% respectively in October. That should translate to higher food inflation over the next 4-6 months. In fact, we expect food prices to rise by 5.3% in 2008.

Question: How Does Inflation Impact My Life?

Inflation hurts your standard of living because you have to pay more and more for the same goods and services. If your income doesn't increase at the same rate as inflation, you will find your standard of living declining even though you are making more. Also, inflation doesn't impact everything equally, so that some things (such as gas prices) can double while other things (your home) may lose value. For this reason, it makes financial planning more difficult. Inflation is really bad for your retirement planning because your target will have to keep getting higher and higher to pay for the same quality of life. In other words, your savings will buy less and less, so you will need to save more and more. However, everything you buy today costs more, so you have less left-over income available to save.

Inflation has another bad side effect....once people start to expect inflation, they will spend now rather than later, because things will only cost more later.

This consumer spending heats up the economy even more, leading to further inflation - this situation is known as spiraling inflation because it spirals out of control.

It is also important if you are holding bonds or Treasury notes. These fixed price assets only give a fixed return each year. As inflation spirals faster than the return on these assets, they become less valuable. As they become less valuable, people rush to sell them, further depreciating their value. As their value becomes lower, the government is forced to offer higher interest rates to sell them at all.

Learn how to build your wealth and manage your money. Equip yourself adequately with financial literacy. If it is not now, then when? Many people tend to wait for the right time to do something right. There is no such thing as the best / right time because time will never be right.

Secret Psychology To Money

Have you ever wondered why some people seem to get rich easily, while others are destined for a life of financial struggle?

Is the difference found in their education, intelligence, skills, timing, work habits, contacts, luck, or their choice of jobs, businesses, or investments?

The answer is: None of the above!

WINNING THE MONEY GAME

Most of us were never taught how to win the money game and if we were, most likely we were taught by people who weren’t very good at it. The first critical element in winning the money game is knowing exactly how to do what rich people do to get and keep wealth.

If you want to change how you deal with your finances on the outside, you’re going to need to change how you think about money. You are going to have to learn the “inner game” of wealth building. Go within, make the changes, and your outer world will manifest what you choose!

YOU HAVE A PERSONAL MONEY AND SUCCESS BLUEPRINT

We all have a blueprint that decides how we handle money. It’s deeply ingrained in our subconscious and it determines your financial destiny. It comes from our past programming—things we learned in childhood in three 3 primary ways: Verbal Conditioning - what we heard; Modeling - what we saw; and, Specific Incidents – what we experienced.

But here’s the key:

YOUR FINANCIAL BLUEPRINT CAN BE CHANGED!

“Your income can only grow to the extent that you do!” -- T. Harv Eker

Start growing your financial mindset today. Equip yourself with financial literacy and you will experience growth in your income.

“If you think education is expensive, try ignorance.” -- Benjamin Franklin

So what is your financial blueprint set for? Are you set for success, mediocrity or failure; ease or struggle; consistent earnings or an “up and down” income?

Some of us are set for saving, some for spending, some do both in cycles that keep them financially treading water their whole lives. There are those who instinctively choose winning investments and those who consistently pick losers. But...how do you know which way your blueprint is set?

One way is to look at your results!

Now here's something factual to prepare yourself. Do you realize that by the time you reach age 65, there's a...

45% Chance you'll depend on family and friends for financial help
28% Possibility you'll rely on public assistance
22% Likelihood you'll still be working
4% Probability you'll only be able to meet your basic needs
1% Chance you'll be financially independent

Which one do you choose to be in?

Top 1%? Congratulations on your wise choice.

Make it a commitment and change all your SHOULDs to MUSTs.