How Does Inflation Affect Your Financial Plan?

Have you ever noticed that ₹1,000 doesn’t seem to stretch quite as far as it did five years ago? Whether it’s your weekly grocery run, your child’s school fees, or a cup of coffee at your favourite café—everything is getting more expensive.

That’s inflation at work.

Inflation is the silent force that slowly chips away at your purchasing power, and if you don’t plan for it, it can derail your financial goals—from retirement and children’s education to emergency planning.

Let’s explore how inflation works and how you can protect your financial future from its long-term effects.

What is Inflation and How is it Measured in India?

In simple terms, inflation refers to the rate at which the general price level of goods and services rises, leading to a decrease in the purchasing power of money.

In India, inflation is primarily measured using CPI

Consumer Price Index (CPI):

Tracks changes in the prices of a basket of commonly used goods and services like food, clothing, housing, medical care, etc.

• Reported Monthly by the Government of India

• Considered the most relevant indicator of retail inflation.

A modest inflation rate of 5-6% annually may not seem important—until you realize what it does to your money over the years.

Let’s Consider an Example

Meet Ajay, a 30-year-old working professional planning for retirement at age 60, with a life expectancy of 90 years.

His Current Monthly Expenses: ₹50,000

With an assumed inflation rate of 6% annually, here’s how the future looks:

• Monthly expenses at retirement (Age 60):

₹50,000 × (1+0.06) ^30 = ₹2,88,000

• Total post-retirement years: 30 years

• Required retirement corpus: ₹9 Crore

(calculated using Net Present Value and a real rate of return)

But wait—₹9 Crore in the future is equivalent to ₹1.6 Crore today due to the time value of money.

If Ajay assumes he’ll always need just ₹50,000 a month and plans only ₹1.6 Crore for retirement; his savings would last just 6–7 years post-retirement—not 30.

This is where most financial plans fail—they ignore the impact of inflation.

So, How Can You Beat Inflation?

You can't stop inflation—but you can plan to stay ahead of it.

The best antidote to inflation is investing in growth assets that have the potential to outpace it over time.

For example:

If Ajay starts a monthly SIP of ₹26,000 in an index fund, assuming a return of 12% per annum,
he can accumulate approximately ₹9 Crore in 30 years.

This amount would help him meet his inflated retirement expenses and maintain his lifestyle comfortably.

How ShreeMoney Helps You Stay Ahead of Inflation

At ShreeMoney, we build customized financial plans that factor in inflation, risk appetite, time horizon, and life goals. Whether you’re just starting out or nearing retirement, we help ensure your money grows faster than prices.

Want to know how inflation is affecting your goals?
Book a Consutation

Call/WhatsApp: +91 85518 82161

Email: fpshreyasjoshi@gmail.com

Plan Smart. Stay Ahead. Grow Confidently — with ShreeMoney.

Page updated

Google Sites

Report abuse