Is inflation your friend or foe?

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Inflation can be your friend if you know how to use it. (rawpixel.com pic)

There are many disagreements about inflation numbers. The man on the street will say that inflation numbers are actually higher than what the government says.

The government will say that the inflation numbers are based on a basket of goods and it’s not a number plucked out of nowhere.

Very high inflation numbers are not good for the people. It means that your money gets smaller too fast.

Thus, your ability to afford things get worse too. However, a small amount of inflation like 2% more realistically 3% is okay. The country’s inflation number on average is 3.4%.

A small amount of inflation is acceptable. (tradingeconomics.com pic)

By the way, inflation is really based on a basket of goods, and the inflation number debate happens in most countries where the people have the freedom to say what they want. Malaysia is one of those countries. Some people think of inflation as an enabler.

Will there be a day when inflation ceases to exist? What will happen if there is no inflation? For one thing, everything will stay stagnant. Prices will not move at all.

If the price of goods and services stop increasing, you should ask yourself why you need salary increments. Salary increments are not given only to those who perform exceptionally well. They’re given to all if the company enjoys profits.

Companies do not want their staff to live a worse off life this year versus last year. If the price of meals, property and everything else remains exactly the same, then your life will be very stable. Is this really possible? Well, no country in the world has been able to achieve this yet.

What is the cause of inflation? Which came first, higher salaries or inflation? We do not know whether inflation is the cause of people being paid higher, or people were paid higher and thus inflation happened.

That does not matter. What we need to know is that because people enjoy a higher pay, they can then afford to pay more for goods and services, including property.

This is why it’s best to save some of your salary, buy a property and then wait for someone else’s salary to move up and buy your property instead.

It works, as readily proven in many countries, especially the advanced ones. Happy understanding that inflation can be a friend.

This article first appeared in kopiandproperty.com