Why Every Investor Should Use an Inflation Calculator

For many investors, the focus is always on the returns of their investments. However, they often overlook an important factor like inflation. It reduces the purchasing power, as the value of money decreases over time. This means your money today won’t have the same value tomorrow. This is why an inflation calculator is an essential tool for any investor. It helps them assess the situation and plan for their future investments. As a result, it becomes easier to maximise the returns.

What is inflation?

Inflation refers to the increase in the prices of goods and services, which happens in an economy over some time. A currency unit can buy fewer quantities of a product or item over time. It affects everyone in the system, from lenders to borrowers.

There are different ways to measure inflation. However, the most common is the Consumer Price Index. It tracks the average price changes of goods that people buy. Inflation can have mixed impacts on an economy. Some of it is healthy, but a high one can adversely affect the country.

Understanding the impact of inflation

Every investor plans to save up effectively, but certain external factors, like a price increase, may affect savings. The rise in the price of goods reduces an individual’s purchasing power. Generally, people save their money in banks to keep earning interest. But in times like these, it may not help balance out inflation. It corrupts the purchasing power of savings, making them of lesser value over time. Over time, it can lead to reduced wealth and financial security.

For example, if someone invests a Lakh and gets an annual return of 8%, it might look like a good return. Suppose, in a few days, the inflation rises by 6%. In this case, their actual purchasing power grows only by 2%. In this situation, a calculator will help you understand the impact.

How do you prepare for inflation?

The first step is to know where your money goes. You will save a lot by monitoring this and cutting back on areas you can. Track your expenses and identify the areas where you can stop spending.

Once you understand your expenditure habits, you can create a budget. It will allocate your income towards essentials and savings. You can regularly review your budget and adjust it. Inflation can cause some expenses to rise faster than others.

The price rise has an inevitable presence in the economy. Though the government tries to control it through fiscal policies, specific effects are beyond control. Therefore, you must be prepared for such situations. With careful investments in the share market, you can purchase stocks and mutual funds. As observed over the years, these provide reasonable returns.

Inflation is like a never-ending aspect. It will gradually reduce the value of savings, which can affect your future financial goals. To balance this, you must invest wisely and take a long-term approach to economic planning.

Benefits of using an inflation calculator

By considering this price increase, you can set more realistic goals. The tool helps you understand how much you need to invest to achieve your purchasing power. You can calculate it all, whether it is about retirement planning or a dream vacation.

Investment selection

Different shares offer different returns. In these situations, the calculator compares how various investments perform during inflation. This information helps you to choose assets that can outpace the price increase and grow your wealth.

Better financial planning

Inflation calculators can be used for more than just setting long-term goals. You can use them to plan temporary expenses like car repairs or down payments. By understanding how it affects your savings, you can make budgeting decisions.

To prepare for such expenses, you can open a demat account online to adapt. According to  Motilal Oswal Financial Services, in February 2024, India’s total number of demat accounts increased to 148 million.

Finding the right calculator

Many Indian financial institutions and investment platforms offer free tools. These user-friendly tools allow you to customise inputs based on your needs.

Advantages of using an inflation calculator

You can plan for rising costs and make informed financial decisions. Such tools help you better understand how the economy is performing and how to adjust your expenses accordingly. Following are some advantages of using such a calculator.

Planning for rising costs

Such tools can help users understand how prices will increase over time. They can adjust their savings and make financial plans accordingly. This proactive planning helps prevent stress and helps you achieve your financial objectives.

Make informed economic decisions.

Inflation calculators can help users understand how much their money will be worth in the future. This allows you to make wiser monetary choices. This knowledge helps you to adjust your budget and investment strategies effectively.

Assessment of investment returns

It can help users understand an investment’s true earning potential. Such tools can help you determine whether your investments are growing your wealth.

Track the rate of inflation.

These calculators can help users track the rate of the price increase. This is important for budgeting and long-term planning. By knowing the inflation rate, people can understand how the value of money has changed. With this newly gained understanding, they can plan for a better future.

Using a reliable calculator from Motilal Oswal

The Rupee inflation calculator allows individuals and organisations to predict and prepare for increasing costs. With the help of dependable tools, you can determine how the prices of commodities will rise.

The calculator has a simple interface ideal for investors of all levels. It allows you to enter information like the inflation rate, investment period, etc. This tool improves your financial planning for a secure future. Therefore, it is a vital tool in an investor’s toolkit.

Wrapping up

So, start using an inflation calculator today. The calculators offered by Motilal Oswal offer a quick and easy way to understand the impact of inflation on your money. It can be a valuable resource for anyone planning for the future.

A few simple clicks will give you a clearer picture of your financial needs. With this newly acquired information, you can make smarter choices that secure your financial investments.

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