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


Recommended

by NEWSROOM AI
Read More
Pay less fees and tax on your investments. Diversify. Then be patient…

Pay less fees and tax on your investments. Diversify. Then be patient…

The market is toast. Don’t leak money! Bruce Whitfield interviews Craig Gradidge, South Africa’s top wealth manager.

3 best shares to buy this week (by Cannon Asset Managers)

3 best shares to buy this week (by Cannon Asset Managers)

Dr Adrian Saville shares his stock picks of the week.

Last week was the JSE’s best in 10 years. Did you time it right?

Last week was the JSE’s best in 10 years. Did you time it right?

You cannot predict market turnarounds. Seriously. It’s freakin’ impossible, says Personal Financial Advisor Warren Ingram.

3 best local and offshore shares to buy, right now (by Herenya Capital Advisors)

3 best local and offshore shares to buy, right now (by Herenya Capital Advisors)

The Money Show’s Bruce Whitfield asks Herenya Capital Advisors founder Petri Redelinghuys for his stock picks of the week.

How to save and buy an island (you need only R2000 per month)

How to save and buy an island (you need only R2000 per month)

Saving money on boring stuff such as a car can allow you to do really outrageous and courageous stuff, says Sam Beckbessinger.

3 best shares to buy, right now (by Sasfin Securities)

3 best shares to buy, right now (by Sasfin Securities)

Nesan Nair, a stockbroker and portfolio manager at Sasfin Securities, shares his stock picks of the week.

Popular articles
'Perhaps somebody is misleading the Public Protector'

'Perhaps somebody is misleading the Public Protector'

Bishop Malusi Mpumlwana gives his take on the supposed 'fightback' against Pravin Gordhan.

'I don’t spend much. I drive an old car. I’ve never been in debt'

'I don’t spend much. I drive an old car. I’ve never been in debt'

Bruce Whitfield interviews analyst Chris Gilmour about his attitude toward money (hopes and fears, successes and failures, etc.).

Daughter of Timol murder accused Joao Rodrigues reveals sexual abuse

Daughter of Timol murder accused Joao Rodrigues reveals sexual abuse

Tilana Stander talks about the abuse she suffered at the hands of her father.

[LISTEN]  My Life Beyond HIV

[LISTEN] My Life Beyond HIV

Pholokgolo Ramothwala chats to Azania about living with HIV and his newly released book, My Life Beyond HIV.

WATCH:  Crash, bang, wallop! How would YOU explain this to YOUR boss?

WATCH: Crash, bang, wallop! How would YOU explain this to YOUR boss?

The woman comes out of the crash without a scratch but is visibly distressed by the incident that she may have to explain later.

[LISTEN] Steinhoff explained: 100 times more looted in Steinhoff saga than VBS

[LISTEN] Steinhoff explained: 100 times more looted in Steinhoff saga than VBS

Steinhoff’s Web of Deception: An Explainer with Financial Mail journalist Warren Thompson.

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.