Using an inflation calculator to protect your wealth from inflation
Various economic factors constantly affect living expenses, prices, and salaries. Inflation is one such factor that influences the value of money over time. Whether saving for retirement, investing in the stock market, or budgeting for future expenses, inflation slowly reduces your purchasing power. It can impact your financial goals significantly.
Inflation is inevitable, but you can fall short of your goals if you don’t factor it in while planning your finances. This is where using an inflation calculator, a free online tool, can be helpful as it takes the guesswork out of planning for future expenses by factoring in inflation rates.
With basic inputs, such as your initial investment amount, years invested, and expected inflation rate, you get a clear idea of your investment’s worth in the future. The tool helps you make better financial decisions, plan for the future, and protect wealth, which are important for long-term economic prosperity. Here is how.
Adjust your retirement planning.
Retirement planning is crucial to wealth management, and inflation can significantly impact your retirement savings. Using an inflation calculator online lets you know how much you need to save and invest to keep up with inflation and maintain your lifestyle even after retirement.
For example, suppose you plan on retiring after 20 years and have calculated that you will need Rs 1 crore to maintain your lifestyle. You can use any inflation calculator in India to determine how much that amount will be worth in 20 years. Using the tool, if the average inflation rate is 5%, the future value of Rs 2 crore in 20 years would be approximately Rs 2.6 crore.
It means you need to save more now and invest in top mutual funds or inflation-adjusted assets so that your savings have the same worth in the future to support a comfortable lifestyle after retirement.
Understand the real value of your investments.
Using an inflation rate calculator helps you understand the actual value of your present investments over time.
Consider a case where you want to invest Rs. 10 lakhs in a mutual fund plan for ten years. Assuming an average annual return of 10% without calculating inflation, you will find that your current investment value will be Rs. 25.9 lakhs after ten years. But, with an average inflation rate of 4% over the same period, your actual investment value adjusted for inflation is Rs. 14.8 lakhs.
You might have fallen short if you had planned on using this investment amount to fund a big purchase or expense.
Make the right investment decisions.
Whether you are investing in high-growth mutual fund schemes or any other investments, it’s important to calculate inflation and how it can affect your returns.
An inflation calculator can help you evaluate if your current investments can outperform inflation and preserve your purchasing power. You can make strategic decisions based on the evaluations that align with your set target amount and financial goals.
Protecting your wealth from inflation is a necessary part of financial planning, and one effective way to do that is by using an inflation calculator. The tool helps you better understand the impact of inflation on your future finances and responsibly allocate your resources to different financial goals. But at the same time, ensure you enter the correct data in the tool so that the results are as accurate as possible.