I recently came from a Wealth Seminar in Singapore called Work Your Wealth by Conray Labuschagne last December 13-15, 2019, he is a globally recognized as an extraordinary wealth coach who often shares the stage with Robert Kiyosaki.
In the class, we are about 200 people of different nationalities (Singaporean, Malaysian, Vietnamese, Chinese, Filipinos, Australian, Indian).
In the first activity, we were asked about the different inflation rates of our countries. Participants participated with their own knowledge of their countries’ inflation rates: (SG: 3-8%, MAL: 4-10%, CHINA 4%, AUZ: 1.9%, VIET: 12%, INDIA: 3.13% and PH at 4-5%).
After that, we were made to compute the Personal Monthly Household Inflation. In this exercise, we leverage from the experience of our group to determine what was the price of an item 5 years ago. Then, we worked out the ACTUAL average inflation over 5 years. The formula is seen below:
ACTUAL INFLATION RATE:
Current Value minus the 5 Year value / divide by the same 5 Year Value
Then, Multiply the factor by 100 then divide by 5 = to get the average over 5 years.
Our group is assigned to ENTERTAINMENT, specifically, MOVIE TICKETS for my sub-group. We took in an example by my seatmate. She lives in Nueva Vizcaya, Philippines. She remembers that 5 years ago, her movie ticket is only 180 Pesos, now, the current value is 300 Pesos.
Doing the formula above:
300 – 180 /180 = 0.667
0.667 x 100 = 66.7/5 = 13%
Meaning, the real inflation of a movie ticket in Nueva Vizcaya is 13%.
While waiting for others to finish, I tried the inflation rate of the tuition fee of a certain Medical School I know about 5 years ago and its current value, the result is: 16%.
The entire class did this for all categories: Grocery, Essentials, Education, Entertainment, Medical, and Family Specifics. The result of our class average is 18.5%.
This is a shocking realization on my part, the more important message I got here is, wherever you are, across all the countries there, not only the Philippines, the story is the same.
In fact, Mr. Conray Labuschagne said, as they do this exercise for numerous times all over the world (US, Europe, South Africa and Asia) the world average is around: 20-22% of each class.
Wow. This is really a big AHA moment from my part. You see, being a registered financial consultant myself, we studied inflation and factored in only 4-5% in our computation as we project the future price of things. When, in fact, we should be factoring in 20%, or 4x of our original factor.
If you still don’t believe me, do the computation yourself. Choose items that you really know the price by heart. You only need its price 5 years ago and its current price. Then apply this formula:
ACTUAL INFLATION RATE:
Current Value minus the 5 Year value / divide by the same 5 Year Value
Then, Multiply the factor by 100 then divide by 5 = to get the average over 5 years.
Lesson #1: True inflation is more than what’s in the news regardless of the country you live in.
If we dig deeper on this realization, and we think about its implication. I have to ask you another question, if I may.
How about your income? How much did it increase annually?
The average increase of income of employees is 3-5%, if, you are lucky enough if it did increase.
If our income can’t match the real inflation, what will happen to us moving forward?
If this will continue for years to come, 20% increase in prices of goods and only 3-5% increase in income, and we do nothing about this, what will become of us? No matter what we do, we will always be working for the rest of our lives.
Lesson #2: Your income increase should match the real inflation increase, if you can’t do that, you will be poorer and poorer every year.
I am sorry if this article does not match the fun holiday this season. But it’s the truth and it is my gift to you my dear readers. I am sharing with you the truth un-sugar coated.
This is just part 1, watch out for the part 2.
Now, it turns out that my Christmas Gift to you this holiday season is the gift of knowledge. Knowledge that you need to act on in order to survive.
For your Financial Health,
Watch out for my next article of this series.
If you want to change your financial future and you need help, contact me here.
READ MORE:
- 5 Reasons Why You Need To Have Green Book For Doctors (Second Edition) Even If You Already Have The First Edition
- How to Build Your Wealth Using Other People’s Money
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