The 4% inflation myth!!!

( unrelated : I do a lot of offline writing , so will post more regularly. Hopefully the quality will improve )

One of the myths you hear when you plan your finances is to take into account the inflation. If you are financially educated , you would have heard the difference in real and nominal rates et al. But have you ever bothered what is the inflation rate applicable to you?

If you live in India like I do, then the mai baap government doles out a figure called WPI - wholesale price index which is what the whole business press creates a ruckus about, but when the heck did you and me buy in wholesale? There is a CPI - consumer price index and rightfully its different for different set of people, but then that comes with a lag. This is not a discussion about the pros and cons of various inflation indices. I will reserve that for a boring chat with some of you who are both statistically and economically inclined.

My limited point is - when you planning for the kind of money you want, think of a factor called "lifestyle inflation" - If the hierarchy of needs were just needs, comfort and luxury - remember they will keep getting redefined. Yesterdays comforts are today's needs and today's luxury will be tomorrows comfort. I come from a class and generation of kids who learnt cycling using rented bicycles.... I don't see those shops these days. So bottomline use your imagination and budget for higher expense on essentials

The other factor to factor ( !!) is remember that your life goals will also change - A few days ago i rediscovered how much I love to travel, that I want to see more countries. My current count is 9, and I want to atleast increase it 45. So my plans better take that into account. So what is your life goal - space travel?

As a generation - am not sure we will stick to an organisation for 3+ decades ( that ~11000 working day!!! - subtract sick leave and earned leave ) - since you will change jobs, career - plan for expenses for upskilling/ reskilling yourself. Those will be significant expenses. Also I think since the stress is higher, crutches of a joint family are missing, other social support systems missing - we will burnout sooner - so get the period right

Am sure there are others - all these are stuff which are like inflation, so don't factor a bland 5% inflation the government wants you to believe....