As a responsible person, you save and invest money to build a secure future with financial stability, freedom from debt, and improved quality of life. But have you considered how inflation can affect your savings and investments and reduce their value? Inflation happens when food, clothes, and housing prices increase over time. So, your current savings will not hold the same value as inflation reduces its purchasing power over time.

Let’s say you have saved Rs. 10,000 for a future expense. But, if the inflation rate is 5%, you will need Rs. 10,500 after one year to buy what Rs. 10,000 can purchase today. If you don’t factor in inflation, you will realize that your savings are insufficient to meet the actual expense.

To combat inflation, you need to save and invest wisely. This means investing in assets and securities that generate higher returns than the inflation rate. Here, an inflation rate calculator can be extremely helpful. This tool helps you calculate the future value of your investments by adjusting for inflation.

Here is how an inflation calculator calculates the future value of your present investments

An inflation calculator factors your total investment amount, the years your investments will take to mature, and the expected inflation rate. It then calculates the projected future value based on these factors.

You invest Rs. 1,00,000 in a mutual fund for five years with a 10% annual return rate. If the inflation rate during those five years is 5%, an inflation calculator will tell you that your future investment value will be Rs 1,27,628. But, if you do not calculate inflation, you might assume the future value would be Rs 1,61,051. Thus, an inflation calculator shows the real worth of your investments.

Benefits of using an inflation calculator

• Accurate calculation

As an investor, it is important to know your investment’s profits. A nominal rate of return is one way to do that, but it doesn’t include inflation’s effects on purchasing power. An inflation calculator factors in inflation and shows the real return on your investment. You can use the results to invest in stocks, gold, real estate, or best mutual funds for higher returns.

• Helps in retirement planning

With an inflation calculator, you can estimate your future living expenses like housing, healthcare, and groceries and set retirement goals to cover these expenses.

For example, if you plan to retire with a goal of 1 crore rupees, an inflation rate calculator can help you estimate its future value. This way, you can invest in the right assets and securities to earn better returns and keep pace with rising costs.

• It can be used as a budgeting tool for personal finance management

Knowing how inflation will affect your expenses allows you to adjust your budget and savings plan. This further helps you avoid overspending or underspending and maintain your current living standard in the future.

Conclusion

Inflation affects almost all aspects of your life, especially finances, making planning important. With an inflation calculator, you can project your future financial situation and take the necessary steps to stay financially secure. Moreover, you can use an inflation calculator in India for free, making it easier to plan for the future with greater accuracy.

While using this calculator, always double-check your inputs and use trusted sources so that results are as accurate as possible.