Inflation is responsible for our loss of purchasing power, or in other words, it is the reason that the prices of the products and services we buy or contract are increasingly higher.
I am going to explain it with a simple example, imagine that two years ago you bought an object and it cost you € 10.00, keep imagining that today you need to buy a product exactly the same again and when the time comes to pay you see that this product is going to cost € 11.00, that increase of one euro in the price is caused by inflation.
If we want to achieve a prosperous economy, we must understand how inflation works and take the necessary measures to minimize the effects it has on our economy, regardless of whether our income is high or low, whether we speak of personal, family or business economies, because inflation affects everyone.
I invite you to check how this economic phenomenon multiplies the average level of prices in the economy, while reducing the purchasing power of your money, doing a simple exercise carried out with real prices, let’s see four products and the prices they had in Spain in the year 2000:
– A loaf of bread € 0.30
– A Coffee € 0.60
– A liter of milk € 0.55
– A cinema ticket € 4.00
How much does it cost you to buy these same products or services today …? That increase in prices is inflation.
If our income grew at the same rate as prices, our purchasing power would not be reduced but the reality is, as published in the newspaper EL PAÍS in an article dated January 6, 2017: “In 2000 the average salary in Spain was € 19,500.00 annually ”, this same newspaper in another article dated June 21, 2019 says:“ The average salary in Spain was € 23,646.50 annually ”.
As we see, prices rise more than the incomes of people who work and earn a salary rise, so these people need to develop strategies that help them combat the negative effect that inflation produces in their economies.
For people who live daily, that is, those who cannot save, one solution is to seek, until they find it, an alternative source of income that makes them earn more money (I will not give examples because each case is unique and requires a strategy that adequately responds to the needs of that specific case) and we must not forget that this alternative source of income will only be effective if it provides us with a flow of money that equals or exceeds inflation, otherwise we will not have solved anything.
If, on the other hand, we are talking about people who manage to save and have accumulated a more or less large patrimony, it is necessary to tell them that if their savings are not revalued, the money they have will be worth less and less because they will gradually lose purchasing power, so the only way to fight inflation is to invest and make that capital continue to grow, this will give us the peace of mind of having our backs covered.
It is said that two heads think better than one, which is why it is important to have the experience of a professional to help you when making decisions, solving doubts or clarifying any issue.
Our job at SEL-DEK is to help people like you to improve their financial situation, live more peacefully, give their children the best education, in short, ensure that with our support they get to live a little better every day.
At SEL-DEK we are independent professionals and we work every day with one objective: to improve the economic situation of the people who trust us.