Charting a inflation path for your financials

Today when you go to any of the sites where you can do retirement planning or planning for financials, they have a place where you can input the expected inflation . Using that number, the calculator tells you how much you need to save.

You of course understand that this is a critical path to how much one needs to save for the future. Even a small difference of 1% can yield you completely wrong calculations for your future. Usually these sites use a inflation number of 6 or 7%.

So ,  is this really a right number .. should we use the same number for each and every aspect of our savings portfolio.

Let's consider some key information.

Healthcare costs seem to be going through the roof. Money spent for a cesarian some six years ago is almost half of that being asked for by hospitals now. Using the 72 rule, this means that the cost of hospital , medical is rising by 12% per annum... Ie now where near the 6% inflation rate being considered. Also the premium for healthcare insurance policies usually increase by 10% every year!

Another quick example is MBA or higher studies. Easily nowdays this costs somewhere around 10l of rs in a very normal college... From when I passed out this is 5 times the cost in 16 yrs! No where near the 6% inflation rate being assumed. Or take the example of my child's school fees.. standard increase of 10% every year !

So in short , each area of the planning should consider a different inflation rate.. especially places like education, healthcare costs , travel.

So think through what you should be looking at for inflation adjusted returns.. it's not the 6-8% rule anymore in India.

Think simple..
Think simplefinancialsense