LIFESTYLE
INFLATION impact is undeniable and it is a bigger killer than even Inflation!
“I know Inflation.....but whats this new
term.....Lifestyle Inflation?”
Let me
explain with an example
Mr.AtiBhudi : “My present Monthly expenses is about
Rs.20,000. Prof.Kent, can you help me understand how much I require in 30 years
from now, when I am 60?”
Prof.Kent: “Thats a very interesting question,
Mr.AtiBhudi. If we calculate at 7% inflation (which is average of last 38
years), our expenses will DOUBLE EVERY 10 YEARS. So, that means, you will be
needing about Rs.1,60,000 per month at the age of 60.” “But” Prof.Kent
continued “I have not calculated Life
Style Inflation here”
The confused
Mr.AtiBhudi : “What is this life style
inflation? Never heard of it!”
Prof.Kent: “Ha....Let me explain. Few years ago, we used
to have VadaPav for Rs.5 and today we can get the same VadaPav for about Rs.15.
But, tell me how many times you went and had a Burger instead of Vadapav? Many
times...isnt it? And this Burger cost STARTs from Rs.50. This jump from Vadapav
(Rs.15) to a Burger (Rs.50) is called LIFE STYLE INFLATION”
The
Professor continued “This is just one example. There are many
such happening to you without you realising.
Like, earlier you were thrilled to be going to GOA every couple of years, but now you want to explore Thailand, Sri Lanka.....isnt it??
Like, earlier you were thrilled to be going to GOA every couple of years, but now you want to explore Thailand, Sri Lanka.....isnt it??
And of course, upgrading your iPhone!!!
The Biggest reason why LifeStyle Inflation happens is because YOU “COULD” and not because you “NEED” TO!!!”
Mr.AtiBhudi
grumbled : “Oh no, so you mean to say I
will be requiring MORE than Rs.1.6 lakh per month?!”
Prof.Kent: “
Yes....you guessed it Right Mr.AtiBhudi”
Mr.AtiBhudi
: “Okay....now tell me how much life
style inflation should I consider?”
Prof.Kent: “Now....thats very confusing as there is no
set Lifestyle Inflation figures as such. But, having said that....we can check
with Lifestyle Products like Branded Shoes, Jewellery, Watches, Car, Bike,etc and safely
assume the Lifestyle Inflation to be around 10%”
Prof.Kent
continued : “With this 10% assumed
Lifestyle Inflation, your Expenses will be DOUBLED EVERY 7 YEARS (and not 10
years as assumed earlier), which in turn means....you require about Rs.3.5 Lakhs per month at your
age of 60!
And, you will be a needing a corpus
of (in simple terms.....Rs.3,50,000 per month * 12 months & 25 years) Rs.10 CRORES as your RETIREMENT
KITTY”
Mr.AtiBhudi
was shellshocked “Oh My God!!!
Prof.Kent...I can never hope to retire comfortably then”
Prof.Kent:”Dont get depressed Mr.AtiBhudi. You can
retire comfortably. Its not Rocket Science. You will be needing to invest just Rs.18,000 per month till you retire (that is...for the next 30
years) to reach the targeted Rs.10 crores!!! (The Investment Value will be
Rs.64.8 lakhs) “
Mr.AtiBhudi
jumped in disbelief : “WOW!!! Only
Rs.18000 per month. How come so less can get me such a huge huge amount of
Rs.10,00,00,000!!!!??”
Prof.Kent
laughed and said “That, Mr.AtiBhudi, is
called the POWER OF COMPOUNDING”
Excited
Mr.AtiBhudi : “Prof.Kent, lets start a
SIP of Rs.18,000 for my Retirement Kitty right now!”
All the Best,
Srikanth Matrubai
SriKavi Wealth
Await my article on HOW TO AVOID LIFESTYLE INFLATION and more on this topic in coming days.
Also do visit & join my TELEGRAM channel http:/http://https://t.me/MutualFundWORLD/
Special thanks to Dr.Ankit Ajmera for basic idea
The MOST Loved book on How NOT TO RETIRE RICH!
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Excellent article....new term for investors - lifestyle inflation !!
ReplyDeleteeasily relate-able and an interesting concept.
ReplyDeleteNew style to explain the life style inflation. Thanks Shrikant Bhai.
ReplyDeleteSrikant wonderful article...How 18,000 will convert to 10 ₹cr...Will please elaborate on this?
ReplyDeleteThanks in advance.
This is one side of the story! Another side, there is deflation lingering on! A person at the age 30 may upgrade from vada pav to burger, but soon that person may revert back to just home cooked food. Then upon, a walk in the nearby park may be all one wanting instead of all that thailand and other lands! Moreover if a person wants to invest 18k per month, he should be earning nearly a lakh per month. And again if Mr.Atibudhi claims his monthly expenditure is just 20k per month herein bangalore, he may not be eating that humble vadapav also!!!
ReplyDelete