Inflation: Why You Need to Know it?
Whether you’re an employee, business owner, or more, inflation is one thing you need to be particularly conscious of these days. Inflation means there has been an overall increase of prices for services and goods in a country, thereby decreasing the purchasing power of most individuals. In short, the current value of your money lessens over time, making it so that you can buy fewer things later with the same amount.
While inflation has risen faster due to the global economic crisis, there are usually different reasons as to why this occurs, but the most common ones are the following:
- The value of legal tender has been legally reduced
- More fiat money has been printed and given to residents
- Demand is greater than supply for products
- Price increase for materials and wages
For Cambodia alone, the inflation rate in 2021 as reported by the Asian Development Bank (ADB) was 2.9% and they predicted that it’s 5% for 2022. It’s a drastic price increase in one year alone. While ADB predicts that Cambodia will have an inflation rate of 2.2% in 2023, it’s not a guarantee that you can be idle with your money.
Moreover, while purchasing power is largely reduced depending on the inflation percentage, it doesn’t necessarily mean that you need to panic since there are ways you can combat inflation. One of the best moves you can do is to invest as early as possible, so that the profit you can get from the investment increases alongside the inflation.
For example, if you invest in real estate, when inflation rises, the value of your property can increase with it. It’s especially true if the real estate property you buy is leased, since you can increase the rental price as well according to current market prices. In short, you have a bigger cash flow you can use to hedge the inflation.
There are other investment opportunities you can look into to use to hedge inflation but one of the best industries to dip your hands in is real estate. After all, it’s an investment that will only increase in value in the future. So, whether you’re worried or not about inflation, one thing is for sure: you need to start investing now so your purchasing power over the years doesn’t decrease!