Inflation...

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Inflation...

Downsizer Forum Index -> Finance and Property

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Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Sun Oct 30, 05 8:35 am Post subject: Inflation...

One of the difficulties with planning for the future is knowing how much your money and savings will be worth when you need them. For example, if you get 4% interest on your savings and inflation is 5% your money goes down in value every year and you lose just over 10% in 10 years. At the moment it seems ok as inflation seems to be only 2-3%.

However, I was reading that the basket of goods they use to calculate inflation now includes DVD players and laptop computers rather than council tax and energy bills. Cynics may say that this has been done on purpose to keep the headline inflation low (I couldn't possible comment), but what does this mean for a downsizer?

Well, many downsizers will not be buying the latest gadget or buying food that's imported from all over the world or battery farmed goods but will need to pay council tax, insurance etc. So we could have to make plans using a far more realistic inflation rate of 10% which is frightening, especially when thinking about a pension. The only good news I can think of is, hopefully, we can find ways of using less fuel so make savings there.

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28233
Location: escaped from Swindon

Posted: Sun Oct 30, 05 8:48 am Post subject:

The basket approach to inflation has always been a con.

The prices of gadgets, or of housing (I think mortgage rates or prices do figure somehow) has always been irrelevent to the poor and the old, for whom, food, fuel, clothing and taxation is far more pertinant.

Food i think currently is also very low inflation, as whilst stories of supermarket price wars are more the product in my view of supermarket spin doctors, there is little doubt in my mind, that competition in this sector is increasing.

For the downsizer looking to the future, I think the only answers lie in political change, as no one in a normal income bracket can hope to save enough regardless of whether their current priorites are buying the latest DVD player, or eating ethically.

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