QUESTION: Financial goals: how to account for inflation in goals?

Inflation is a factor that gradually reduces the purchasing power of money, which is why it must be factored into medium-term and long-term planning. If your financial goal is designed for just one year ahead, you simply need to add the expected inflation rate, which is usually around seven to ten percent, to the total amount. This will protect you from the unpleasant surprise of being able to buy much less than planned for the same money a year later.

For goals with a horizon exceeding three years, simply adding the inflation percentage to the amount is no longer enough, as money will lose value too quickly. In such situations, part of the accumulated funds must be kept in financial instruments capable of generating returns above the inflation rate. These instruments include various investment products that help capital not just lie dead weight, but work and multiply.

However, it is extremely important to follow a strict sequence of actions: you can form the investment part of your portfolio with a potential higher than inflation only after you have fully built a reliable emergency fund. Risking your last money to beat inflation is strictly prohibited, as it threatens your entire financial stability.

Apply the following order of actions to correctly account for inflation when calculating goals.

Compliance with these rules allows you to competently protect your savings from depreciation and preserve the real value of the accumulated capital. Understanding the laws of inflation makes your financial planning professional and mature. You will be able not just to accumulate numbers in an account, but to actually achieve the material results you originally planned.