Welcome to Inflation…… the Silent Thief, ever present in full view seldom noticed, mostly ignored the unwelcome permanent guest where ever we go!
What Is Inflation? Inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy.
Inflation can effect nearly any product or service, including those we consider essential expenses such as housing, food, medical care, education utilities, as well discretionary expenses, such as cosmetics, clothes, footwear cars, smart phones and jewelry to name a few. All these make up a ‘market basket’ which make up the CPI(consumer price index) Other item included in this basket could be Tobacco and Beverages, including alcohol Furnishings, Transport, Communication, Culture and Recreation Hotels and Restaurants etc.
The CPI (Consumer Price Index) for individuals who live in different parts of the world will also be different
As per the latest April 2022 from Trading Economic.com this is what the inflation numbers look like in percentages
Japan 1.2% China 2.1% Saudi Arabia 2% Switzerland 2.5% Indonesia 3.47%
France 4% South Korea 4.8% Australia 5.1% Singapore 5.4% South Africa 5.9%
Canada 6.7% United Kingdom 7% Germany 7.4% India 7.79
United States 8.3% Russia 17.8% Turkey 69.97% Lebanon 208%
The UAE with an inflation rate of 2.5% has expatriates from over 200 nationalities registered as living in the country.
We come from different countries where the cost of living will be higher lower or par with the UAE. If you intend to live and earn money in the UAE for 5 years or more you have to price in inflation when you Earn Save and spend your money, not only in the UAE but your home country.
Many of us have been here for all our productive years! Our families have lived here for over 20 years, Some of us came as kids, single, newly -weds, with families. We grew up got an education got a job started a business bought property etc. With new incentives like long term residence, golden visas, etc. many of us will choose to live here in ‘retirement’
Be it anywhere in the world whatever we do, how much earn and spend, we will need money to live a basic or enjoy a luxury life style. How much does it cost today and how much will it cost 3, 5 , 7,10 years from now? The same? Nah!!
Inflation is a concern because it makes money saved today less valuable tomorrow. Inflation erodes a consumer’s buying power and can even interfere with the ability to retire. For example, if an investor earned 5% from investments in stocks and bonds, but the inflation rate was 3%, the investor only earned 2% in real terms!
Over time, inflation can reduce the value of your savings, as prices in general go up in the future. This is most noticeable with cash. If you keep $10,000 under your bed, aka current account that money will not be able to buy as much 20 years from now. Or, if you have not received an increment or increased your income from your business you certainly will not be able to afford all the stuff you bought say 2 years ago, from groceries to clothes etc.
Let us look at what is often referred to as standard of living easily confused and wrongly identified with quality of life.
Standard of living by and large indicates wealth, comfort, material goods, and necessities of more objective elements. On the other hand, Quality of life is more subjective and intangible, such as personal freedom or environmental quality, mental and physical health. Characteristics that make up a good quality of life vary based on personal preferences. Be that as it may whatever we choose or have to accept we still need money! And inflation will still effect our buying power
Calculate your personal inflation rate: Look at what you’re buying and compare that with price changes on individual items To calculate your own personal inflation rate, scrutinize your finances i.e. income, fixed expenses, discretionary spending and splurging patterns. The closer you zoom in, the better. This is Not rocket science and you can use apps on your smart phone to do this….. go on download and start!!
Start by calculating your personal expenditure…be honest, fooling to justify to yourself won’t change what you are spending
- Does 20% of your monthly budget go toward dining out at restaurants/visits to coffee shops/bars/shisha places etc.
- How much do you spend on personal grooming? Do you go for the famous name/chain so you can showoff or do you go for quality at a reasonable price
- Do you shop only at the popular malls or do you dash off the outlet malls or wait for sales?
- Do you role play ‘Santa Claus’ always buying gifts for others?
- How often do you HAVE to buy something?
- Is Retail Therapy your go to solution when depressed or stressed?
- Where do you buy your toiletries, detergents, toilet paper/tissues?
- Where do you do your grocery shopping?
UAE has from the most ‘exclusive’ to the most ‘reasonable’ so use your commonsense when choosing where to shop and for what. Prices vary by location in the market and, origin of goods.
Here’s a simple example
A Super market chain that sources most of its goods from non-Asian countries charges 3 times more for fruits vegetables meats and fish, the clientele is mostly Non-Asian and tend to have higher incomes
On the other hand, Asian giants who dominate the supermarket industry stock most of same products plus a variety of goods from different origins. Prices are lower and choices are more!! You do the math! Salmon at AED 120/- per kg or AED 90/- per kg. Potatoes at AED 5/- or AED 2/-
How do you commute? Do you own a car or do you ‘Uber’ or, take the metro! Last week I had to attend an event in a place that had no parking!!! The metro was not an option so I thought Ah, I’ll just Uber it!! My jaw dropped when I got a quote for ride the price AED 250/—- one way! OMG! So, I hailed a Dubai taxi asked the approximate price and made my way to the event … AED 90/-
So here’s the deal will people be impressed if I arrive in a Lexus Uber cab? Do I really care or am I just happy I was not stupid to pay AED 190/- more to impress people who don’t really matter!
Here’s a really fatuous assumption… In retirement I /they won’t need so much money as socializing, travel, updating wardrobe, footwear etc. will reduce, Says who?? More ‘retirees are traveling going on cruise vacations visiting rejuvenation spas and more!
Let’s say for argument sake the general public assumes retirees should ‘slow down’ because they are ‘old’ well….. medical insurance skyrockets, medical checkups, diet changes, physiotherapy, optional medical procedures hip/knee replacement, eat away into pensions, retirement funds.
Inflation makes no distinction whether you are baby or a geriatric. You want/need something, you pay the price, cheaper or more expensive is not an option.
Solution…. Research, Investigate, Educate yourself find out where to put your money so that it will continue to grow higher that the rate of inflation. Bank accounts, fixed deposits, bonds, mutual funds, savings and investment plans, real estate, online trading etc.
Break up your money requirements into time frames 3, 5, 10, 15, 20+ years. You know your requirements your dreams, your ambitions! Plan your savings and investments based on your target amounts and time frame and don’t forget to include the INFLATION factor.
Don’t compromise on your well-being, quality of life independence and self-respect.
As you get older your choices are reduced,
Don’t let the silent thief i.e INFLATION rob you! Use Time and Money to work for you Keep up your purchasing power!
Make your money work for you that’s what smart people do!
