Friday, July 4, 2008

Inflation: The Silent Killer

Sharing a thought...

Inflation, to me is like cancer. On the outside everything looks fine but its effect to its host by wasting its cells is unknown until its too late.

Inflation reduces the value of money but the written value on its surface remains the same. The pinch could be felt every time price adjustment is being carried out and once inflation has set in, it never leaves. Thus, the buying power of cash deteriorates as inflation increases.

In treating leukemia, the number of red cells is being increased to overcome the white cells count. Similarly, to overcome cash's reducing puchasing power, we need to generate more cash faster than its depleting rate. To do this, investment is the only way to generate more cash. It could be in various forms and its choice is dependent on its owner's capability, experience, knowledge, etc.

Generally, investment knowledge is very low in Malaysia. We have never been taught in school nor in uni. Most of us were only aware about it once we have had started working and depending on the type of crowd we associate with, our knowledge expands accordingly. It is easy to blame our education system, friends, teachers, parents, etc but the onus is on us to do something to improve our current situation. Therefore, one form of investment that is very important, to me, is to invest in knowledge relating to wealth creation. It could be in the form of books, magazines, journals, seminars, trainings, or just network with the correct group of people, you'll notice your learning curve is shorten. So does this equation makes sense "income = knowledge". I do now. :)

Inflation could be seen as a foreign word to lots of people as they are aware that prices of goods are increasing but did not realise that is the effect of inflation. Despite having known that the cost of goods and services have increased, yet they do nothing to protect what they have had worked hard for. They merely adjust their way of life as they try to fit into the changing economy. Most of the time, they work harder chasing for more money whose value keeps reducing in order to maintain their standard of living. Is that what life is all about? No wonder it has been known that Asians are the hard working lot!

It has been said that the rich lets money work for them. I guess they realised that much earlier thus able to be where they are now than the ordinary people who are still in the dark, chasing money.

The rich invests so that their money works hard for them whilst the poor works to pay for their expenses. The rich use their passive investment or business income to support their desired lifestyle, the poor continue working for money and be a slave to money. Which is your preferred choice?

Since we knew that inflation reduces our money buying power, don't you think you should multiply it quickly by letting your money works hard for you and be your slave instead of the other way round? So, is investment important? You decide.

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