MyMoney Online

Inflation – is the honeymoon over?

The inflation rate is a measurement of the average cost of items which are closely monitored by the department of Stats. The prices movements of around 400 items are measured to establish the annualised inflation rate. The rate is watched closely by the Reserve Bank which is mandated to keep it in a range of 3% to 6%. One of their mechanisms used is the adjustment of the interest rate to either stimulate or contain the economy.

Where is inflation heading?

Rising<span style="letter-spacing: .3pt"> oil prices are beginning to erode the value of our money once again. After the surprising fall from last year the price of oil seems to have bottomed out and is rising once again. The problem is compounded by a weaker rand as the price of oil is quoted in US Dollars, a currency which has significantly strengthened in the same period.

-R10.68 in August 2014 to R12.20. The price of oil was $113 per barrel at R10.68 in August 2014. At present it is $62 per barrel at R12.20.

Our inflation rate has nudged upwards already from 3.9% to 4.0% as a result of the rebound of the oil price and is set to rise even further in the face of rising costs of electricity and food.

Why is contained inflation important?

Well, simply put, it affects the value of your money. If something costs R100 today and inflation is 6% then in 12 years the same item will cost R200 which is double. If inflation is 12% then the same item will cost R200 in 6 years which is half the time.

The higher the rate of inflation the less your money is worth in the future.

What can we do about it?

Get rid of your debt! If inflation rises then interest rates will probably go up. This means that your debt will cost you more.

Invest in inflation beating returns Your returns should be above the inflation rate if your money is to stay real in the future.

Contain your spending Inflation is driven by consumer spending. Curtailing your spend will keep more money in your pocket which can be used to pay off debt and improve your savings.

Listen to Paul's chat to Africa Melane on the radio by clicking below...

Read more from Paul Roelofse at www.investforlife.co.za


This article first appeared on 702 : Inflation – is the honeymoon over?


Recommended

by NEWSROOM AI
Read More
How to buy your first share (even if you only have R50, or less)

How to buy your first share (even if you only have R50, or less)

Got R50? No? Got R5? Personal finance expert Warren Ingram on how to buy shares with tiny amounts of money.

‘Budgeting’ for people who don’t budget (and probably never will)

‘Budgeting’ for people who don’t budget (and probably never will)

A simple savings plan for people who don’t like to budget. Bruce Whitfield interviews personal finance guru Warren Ingram.

Why women must be far more careful with their money than men

Why women must be far more careful with their money than men

Ray White talks to personal finance guru Warren Ingram, who reckons women should take financial planning more seriously than men.

Where to best save and invest so your children can one day go to university

Where to best save and invest so your children can one day go to university

#FeesMustFall, but don’t hold your breath. Take matters into your own hands to ensure a tertiary education, says Warren Ingram.

How to get a tax refund from Sars

How to get a tax refund from Sars

The Money Show’s Bruce Whitfield interviews Daniel Baines, author of “How to get a SARS Refund”.

13 tips for saving hundreds (nay, thousands!) of rands each month

13 tips for saving hundreds (nay, thousands!) of rands each month

The economy is toast. Personal finance expert Warren Ingram shares 13 highly effective tips for making ends meet.

Popular articles
Competition Commission denies allegations of corruption

Competition Commission denies allegations of corruption

Commissioner at Competition Commission, Tembinkosi Bonakele says the allegations leveled against them are utter rubbish.

Parents no longer have to travel with children's birth certificates

Parents no longer have to travel with children's birth certificates

The new Home Affairs upgrades to the system include printing parents details at the back of the child's passport.

Tell me what you want: Study reveals most common sexual fantasies

Tell me what you want: Study reveals most common sexual fantasies

What are your sexual fantasies? Disclosure can bring sexual freedom, but it can also have downsides. A study lists the top trends.

The story of amaBhungane (and how it’s digging up dung on the Guptas & friends)

The story of amaBhungane (and how it’s digging up dung on the Guptas & friends)

The Money Show’s Bruce Whitfield interviews amaBhungane Centre for Investigative Journalism Investigative Journalist Craig McKune.

Meet Elmar Conradie, CEO of low-cost FlySafair (world’s most on-time airline)

Meet Elmar Conradie, CEO of low-cost FlySafair (world’s most on-time airline)

The Money Show’s Bruce Whitfield interviews Conradie for his “ShapeShifter” feature.