Have you wondered how much you need to survive in 10 years? I ask the question as a way of asking how inflation will be like in real effect. We are interested in the purchasing power. Understanding purchasing power is important as it allows us to estimate how much we need to accumulate to retire comfortably.
Let's say we need the following in a month as a rough budget as of today:
- Food ($30 per day) costs $900 per month
- Rent costs $2500 per month
- Transport ($10 per day) costs $300 per month
- Medical and health costs $500 per month
- Entertainment ($150 per week) costs $600 per month
- Utilities costs $300 per month
- Misc. costs $500 per month
The total is $5,600 per month. Quite standard for a comfortable life in a developed society.
To calculate the amount I will need in 10 years per month, given a current need of $5,600 per month and an annual inflation rate of 5%, I can use the future value formula that accounts for inflation:
Future Value = 5600 X (1.05)^10
Let's calculate it.
In 10 years, given an annual inflation rate of 5%, I will need approximately $9,121.81 per month to have the same purchasing power as $5,600 today.
Looking at the figure, I am depressed already. But I shall come back another day to figure out how much is needed to retire in 10 years while maintaining the same purchasing power.
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That's really huge looking the fact that there are some part of the countries that will not really be able to afford those things you mentioned
The way time is running and inflation is happening, we cannot predict how much money we will need every month in the future.
Damn broh, that's almost a 100% increase...that's probably because of the 5% increase and no one ever includes the yearly 5% stacking on one another every year!
but hopefully we are earning more than the 5% over time as well and damn 5.6k is a lot. u could live super comfortable here in malaysia with that :p
Inflation is truly a worrying element when designing the future. It shows that in the analysis one needs to consider the purchasing power over time.
That’s right. I think without this analysis, we won’t know how much we need.
It's tough and that is why we need to start investing in assets. It will be going up along with the inflation and you need things to work for you. The living standards just get harder.
Wow I am already getting scared of my life in ten years to come
To Be very honest, 500-1000 $ is enough to survive in My country. :)
The question is how much would it be in 10 years?
It's quite humbling to notice the stark contrast in purchasing power over the course of 10 years.
Yes, the assumption is also that salary will increase along the way too.
if you wish to hang your life upon fiat currencies, depression may end your life too soon. What you are even calculating seems fair. I tell you there are some parts of the world that have experienced this ten years inflation withing four years.
I agree. So 5% is a conservative figure. Due to the speed of transaction and increased interaction around the world, the faster pace of life could means that we live through way more than 10 years in 10 chronological years.
How much are spare organs going for?
500k HBD will be enough for a passive income of 9k per month. If you stake 70k HBD now, in 120 months there will be 500k HBD there.
This is an idea. But it is also quite high risk.
Your costs for entertainment and rent look like quite high to me?... !LOL
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High prices.
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As inflation has become, having money has become more essential than we can imagine
I appreciate the break down of the numbers. It shows how relevant it is to be financially smart and to keep up with the fluctuations of economic environment.
It's unbelievable how inflation plays with our retired earnings. In such uncertain economic times, forward planning becomes essential.
we will actually be losing money if we consider inflation.
This breakdown is eye-opening! It tells you just how much you should set aside and invest shrewdly for the future to retain the same living standards.
The inflation factor in the future value calculation really buttresses the point that inflation is always eroding the purchasing power. It's a wake up call to sensible financial planning.
It's sobering to think about having to come up with over $9,000 per month ten years from now to just maintain the current living standard. It's a call to save and invest early on.
And to reconsider expenditure habits and options.