Beating inflation, the real measure of financial success
Northmead resident and financial advisor Hans Myburgh shares invaluable financial advice to help fellow Benonians take control of their financial future.
Let’s Talk Finances – by Hans Myburgh, registered financial advisor and Northmead resident.
We all like to see our investments grow.
A positive number on a statement feels reassuring and serves as a sign that everything is moving in the right direction.
But what if you were told that the reflecting amount may be lying to you?
There is a silent force currently working against every investor, retiree and business owner.
It is a threat that does not grab headlines the same way that market crashes do.
It doesn’t send warnings yet year after year continues to steal the purchasing power of your money.
This force is referred to as inflation.
At 6% annual inflation, the cost of living doubles roughly every 12 years. This means that R1m today will in just over a decade, buy what R500 000 once did.
During retirement, when you rely on your savings to fund your lifestyle, this slow erosion can turn a comfortable pension plan into a financial squeeze.
Too many investors look at their statements, elated to see growth, not realising that if their returns are not beating inflation, they are actually falling behind.
How to fight back
The goal is not reckless risk-taking but rather focusing on structured, inflation-conscious investing.
Build diversified portfolios which include real assets and inflation-beating investments that have the potential of balancing today’s income needs for tomorrow’s growth.
Offshore strategies could hedge local inflation.
The investment world offers sophisticated tools to outpace inflation, if you are looking beyond short-term returns.
The bottom line
Inflation does not crash markets, it does not make the news, it simply waits to reduce the real value of everything you have spent decades working towards.
In a world where prices rise steadily and living costs creep ever higher, real financial success is not just about growth on paper, it is about growth that continuously outpace inflation.
If you want your money to work for you ensure that it is growing faster than inflation.
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