January 22, 2011 24 Comments
Inflation affects the purchasing power of a currency.So the one lakh rupees of last year does not buy the same amount of goods and services as the one lakh rupees of today.To find out exactly how much a given sum of rupees of the yesteryears would have been able to purchase in terms of today’s rupees or vice versa we can use this nifty calculator at http://www.yetanothersite.com/inflation-calculator-for-india.htm .Also by assuming an inflation rate we can project how many rupees we might need in future to buy something which costs a certain amount today.
This calculator is a great help in financial planning.We can use it to estimate how much something might cost in future.So by feeding in today’s rates and an array of inflation rates we can estimate how much we need to put aside to buy a house in the future or to pay for a child’s college education or just to retire, depending on various inflation scenarios.As an additional check on our projections we can feed in the data from our parents or grand parents time and check it against today’s prices.So if we know for a fact that our parents managed to retire comfortably on xyz rupees we can take the same number xyz, assume an inflation rate and project it out to our own retirement horizon.Then if we have the same lifestyle as our parents in retirement we too should theoretically be able to enjoy our retirements.
This calculator can also help us estimate the real returns on our investments.So if we bought a house for x rupees 10 years ago and we know its resale value today,we can project out the inflation adjusted rate for x rupees and compare it with the resale value.Similarly we can use this calculator to find out the real returns on any investment avenues we might be considering.We could also key in the data for various assets we have purchased over time and see how inflation has treated assets of various classes.
Do play round with this calculator,the insights it will provide are priceless.
PS: for the missing figures you no longer have to guess.Plug in the figures from here:http://wealthymatters.com/2011/06/29/some-inflation-figures/ , available courtesy CRISIL.