When budgeting, always consider Inflation as one of the Factors
The world of business and finance has always been affected by inflation. However, for those seniors who have just attained the age of 65 and have just retired, let me define for you what inflation is Inflation is basically a phenomenon where the price of goods and services tend to gallop or increase not because of quality improvement but because of the weakness of financial currencies. Inflation has always been associated with untimely increase in prices and also an increase in other charges including bank service charges and interest charges as well. With the knowledge of what inflation is, it important to factor in inflation when creating you budget.
Budgeting without inflation may lead to shortage of finances
Sometimes, whenever seniors plan or budget without taking into consideration the need to add a value that will cater for inflation, they soon realize that they will run out of what they had budgeted for even before the estimated time is over. As a senior who has just retired, it is very important for you to take into consideration the fact that inflation will always get us unawares. In order to avoid shortages, it is important to set aside extra finances so as to cater for inflation when it arises. You will agree with me that, sometimes, you run short of those things that you has estimated and have been lasting you throughout the stipulated period. That is the effect of inflation.
How much should you set aside to cater for inflation?
Most financial advisors will and have advised on the need to set aside 3 percent of the total amount you have budgeted for just to cater for inflation. It is very crucial therefore to add an additional 3 percent on top of the finances you have set aside to cater for the budget you have put down on paper. Many a times, seniors do forget to add this 3 percent only to find themselves a 2020 Medicare Supplement Plans in big mess when they cannot sustain themselves through a given period.
Inflation varies from one period to another
It is important to understand that inflation varies from one period to another. For example, during a boom, inflation may gallop hence making the prices of goods and services too much for common individuals to bear. The good thing is that though you might set aside an additional amount to cater for inflation, you may not always encounter the issue of inflation.