Chapter 2:Inflation ,How powerful of this economy scary enemies ?

What is inflation ?
The measure of price increases within a set of goods and services over a period of time is known as inflation. The most common gauge of inflation is known as the CPI, or consumer price index, which measure the price increases (decreases) of basic consumer goods and services.

• Inflation is wealth stealer. It steal your money silently and unconsciously.Inflation being your biggest enemy on your pathway to get rich slowly.

• You might not aware of your decreasing purchase power in one or two year times but it make a large different in long term, let say 10 years. 10 years ago, 1 plate of mee in my hometown sold for RM1.30. Now the same plate of mee sold for RM2.30. Nearly double! Price of goods doubled every 12 years with inflation rate 6% per years.

OK !Here is one case study that all reader SHOULD BE PAY MORE ATTENTION ON IT,EVEN YOU ARE TEENAGER !!

A rich man wish to retire by selling his business for 3 millions and make it fix deposits with 4% per annum, which mean RM 120000 interest per year. He hope that by this way, he have enough living expenses yet still can give the 3 millions to his children when they pass away.

• Without inflation, it is a nice plan and one stone kill two birds. With inflation, it is just a stupid plan. The rich man’s money become half every 12 years with inflation 6% per year (conservative expectation of inflation rate).
• Below table showing saving and interest with 3 millions at different age

• Although he still can see RM3,000,00 numbers in your bank passbook after 24 years or more, but the value or purchasing power have dropped. He actually only owned RM750,000 value of money!

• Saving money in bank for interest in long term is the most dangerous plan in financial planning. Inflation steal all your wealth.