Posts tagged with "inflation" - page 3
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Should You Be Worried About Inflation
For the past few months we have been hearing about the increasing inflation in the US. Is it possible that the same could happen in India and should we be worried? First lets try to understand the severity of inflation in the US. The inflation number in the US used to hover around 2% for the longest time. But it has shot up to as high as 7.9% in February 2022. That is almost 4 times as high as the average! That does hurt. It is a number not seen in 40 years! In India, the inflation is still not that high, so we don’t have to worry as much as our friends over on the other side of the world. Still, it is always useful to do a thought experiment and see if it is a topic of concern.
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Laptop Price Inflation
Last time I did a review of my electricity bill inflation. Conveniently I was tracking the utility bills since 2012 so I had enough data. That got me thinking. May be I can find other expenses for which I have long enough data to calculate inflation. Remember, inflation is different for different products. For example, your food inflation will be different from your medical bill inflation, or electricity bill inflation etc. So you will need to find the inflation for each category of expenses. Since I recently purchased a laptop, I thought if I can dig up some old bills, may be I can calculate my laptop expenses inflation. Which is exactly what this post is all about.
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Real World Application of 4% Rule
I have not even completed 4 years into retirement, yet I wanted to check how the 4% rule is working for me. Please keep in mind that this is such a short time in retirement that we can’t make any conclusions about whether 4% rule really works in this day and age at all in India. We will only know its usefulness in a much longer duration like a decade or so. This exercise is to understand how a 4% rule will work with and without the 20% buffer I usually talk about. Lets get started.
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Our Real Power Bill Inflation
In the last post I showed you that the electricity inflation over the last 9 was around 7% in Bangalore. Of course the inflation depends on how many units you use. If you are in the lower or higher slab than me then perhaps the inflation may be different for you.
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Power Bill Inflation
I don't normally talk about my inflation numbers in this blog, because I don't have a lot of data. I am the kind of guy who needs data to talk about things. To make sense of inflation we need at least 7 years worth of data. Ten years data will be more useful though. Thankfully I have some of my electricity bills since 2012. So there is long enough history to see the inflation in electricity bills in Bangalore.
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How Much Should I Invest?
While having a conversation with one of my friends, it occurred to me that the current calculators are not sufficient to figure out how much to invest per month while increasing the SIP every year to meet your retirement goal. Lets say, you have an age in mind at which point you want to retire. And you want to know how much you should invest every month of every year until you reach your goal. Throw in a twist, which is that you want to increase your investment every year by some fixed percent. There is no calculator on this blog that will tell you how much you should invest every month. Naturally I thought there should be one, and here is that calculator. Hope it helps you reach your goal. Here are some instructions on how to use it.
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Funding Child's Education Expenses
In the past, I wrote about how to fund children's education expenses, but some of my readers felt that there should be a calculator to figure out education expenses. So naturally, I am obliged to fill the gap with this calculator. I would strongly urge you to read the previous post before using this calculator to understand the basics first. Lets get some shortcomings of the calculator out of the way before using it.
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The Gilt Experiment
You've probably heard about the inverse relationship between bond prices and interest rates. When interest rates rise, bond prices fall and vice-versa. How can we use this information to make some money without a lot of volatility? Read along about my experiment with interest rate cycles.
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How Long Will My Money Last?
How long will your money last? The oft given cliched answer is -- it depends. It is true if you want someone to answer for you. But if you put some effort, you will be able to answer the question yourself. The only problem is that you should be able to make some good estimates of your expenses, inflation and investment return long into the future.
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How Much Do You Need To Retire?
I have touched upon this point briefly in step 5 of How to Retire Early in 5 Steps, but I thought I should expand a bit on that. Most people suggest the 4% rule, which basically states that if your expenses can be met by withdrawing 4% of your corpus, then that should be the corpus size. For example, if you need Rs. 50,000 per month to meet all your expenses comfortably in your retirement, then your corpus needs to be Rs. 50,000 * 12 / 4% = Rs. 1.5 crores. But does it really work?
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