At my age of 29, a lot of people find it odd when I talk about Retirement and how I prepare for my own retirement. They would always say ‘Bata bata mo pa, retirement na agad ang iniisip mo”. I can’t blame them. Maybe they just have to see the other side of the coin where I am looking at. Let me show you some items on that side of the coin that I am seeing. Maybe you’ll also start to think about your retirement at this early stage.
According to the National Statistics Office (NSO), 1997-2007 Census, Philippines’ average annual inflation rate for the past 10 years is estimated at about 6%. (For the illustration purposes, I’ve also included the 2008 inflation rate of 9.3%.) To illustrate further, see how the purchasing power has gone done (see illustration below).
| IMPACT OF INFLATION | ||
| average of 6% annually | ||
| YEAR | % | Value of 1,000 |
| 1997 | 5.1% | P949 |
| 1998 | 9.7% | P856.95 |
| 1999 | 6.6% | P800.39 |
| 2000 | 4.4% | P765.17 |
| 2001 | 6.0% | P719.26 |
| 2002 | 3.1% | P696.96 |
| 2003 | 3.1% | P675.36 |
| 2004 | 5.5% | P638.21 |
| 2005 | 7.6% | P589.71 |
| 2006 | 6.2% | P553.15 |
| 2007 | 2.8% | P537.66 |
| 2008 | 9.3% | P487.66 |
If you got P1,000 in 1996, the only value of that money today 2009 is only P487.66. Imagine that, reducing our purchasing power by more than half of its original value. Because of this, we must make sure that our income, savings and investments grow by at least 6% every year. Otherwise, time will come that it will loose its original value.
When I first saw this, I never thought that inflation will have that great impact on my simple life. That’s why I call it The Silent Money Killer. Agree? Let me know your thoughts by posting on the comment below.