## Some Inflation Figures

Here are some inflation figures from the report ‘Higher inflation cost households Rs 5.8 trillion’from CRISIL.They can be plugged into the calculator here: https://wealthymatters.com/2011/01/22/inflation-calculator/

Hope this helps with your financial planning.

‘The study shows that growth of private consumption expenditure in nominal terms  increased to nearly 17 per cent per year during this period from 14 per cent in  the preceding 3 years mainly due to the rise in food inflation.’

‘The rise in inflation to 8 per cent per year during 2008-09 to 2010-11 from 5  per cent in the preceding 3 years Read more of this post

## Economic Life,Sinking Funds,Amortization and RDs

Having an abundance of material resources and never having to hustle round in the last-minute to find the funds to do what we want to do is a good indicator of wealth.

I first came across the concepts of economic life,sinking fund and amortization as an engineering student.Adapted to our personal finances and business these concepts help us to always have enough money at the right time.

Economic life , a.k.a useful life is the period of actual usefulness of an asset.Beyond this period it is cheaper to replace or scrap the asset than to continue maintaining it.

A sinking fund is a reserve created by periodically setting aside certain sums in an account to replace  an asset in future or to repay a liability.

Amortization refers to spreading an asset’s replacement cost over it’s economic/useful life. Read more of this post

## Please Help Me Understand Gold

I graduated in 2000.In the same year I made my first purchase of  gold.Since then I’ve been watching the price of gold.The first thing to attract my attention was the relentless upward movement in the price show in the graph below:

Logic suggested that what goes up in price must come down.So I tried looking for the historic prices of gold to try to see if there was a cycle . Read more of this post

## Inflation Calculator

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:https://wealthymatters.com/2011/06/29/some-inflation-figures/ , available courtesy CRISIL.