How to Deal with Inflation
Let me give you a tip if you want to know a person’s age but too embarrassed to ask for it. One discreet way is to ask what was the lowest price of soft drink or jeepney fare he can remember. From there, I’m sure you can come with a good idea of how old the person is.
For me, I can remember the price of Coke was only 85 centavos when I was in grade one. And when I was in first year college, jeepney fare was only one peso. So that gives you a rough idea about my age.
My topic for this article is not about age-guessing. Rather, it’s about the undeniable fact that prices are going up. Inflation, no matter what we do, will have an impact in our decision-making everyday.
If you asked an economist, he’d probably give you a very comprehensive definition of inflation and jargons like money supply, currency, debasement, among others. For me, inflation is the general and progressive increase in prices of goods, which means the higher the inflation, the higher the increase in prices of goods.
Another way of looking at inflation is when the value of the money goes down, the value of the goods remains the same. When the purchasing power of the peso weakens, you can buy less goods. Just like in the past, it takes only 85 centavos for you to get a bottle of coke versus today’s almost P20 for the same product.
So who determines inflation? Is it the government? Why can’t the government just dictate zero inflation or demand no price increases of everything for the next 100 years?
The numbers are dictated by the supply and demand of the basic goods that we buy and sell like rice, corn, sugar, coffee, and fuel. Assuming there is only one item that determines inflation, all you need to do is to compare its price last year versus this year. More or less, the percentage difference is already the inflation rate.
Inflation will affect us in more ways that one. Perhaps, immediately affected is our standard of living because we have to pay more for the same service and goods that we need. If your earnings are not growing as fast as inflation, then it is guaranteed that your standard of living will decline. Also note that prices of some goods will increase faster while some may decrease. So inflation affects us in different ways.
Inflation is here to stay. The more intelligent choice is to accept it and try best to cope with it. There are many ways to cope with inflation and one is to increase your savings. You can achieve it by either increasing your income or reduce your expenses or both. To increase your income, make your money work for you harder.
Melvin J. Esteban is a Registered Financial Planner of RFP Philippines. Melvin has been engaged in the financial services industry for over 15 years in various capacities suchas fund management, segments marketing, channel management .
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