This article was inspired by my friend Alex, a primary school classmate who recently returned from the UK during the Christmas break.

Alex is currently pursuing a master's degree in Agro-Medical Studies. During our catch-up session, our conversation shifted towards personal finance and management, and we observed how hard-earned money doesn't stretch as much as it used to.

As each year passes, the rising cost of living affects various aspects of life, including groceries, housing, and transportation. Intrigued by this financial puzzle, we decided to delve into the layers of inflation, uncovering some surprising truths that aren't always openly discussed.

In this article, we explore 10 key points that emerged from our discussion."

Hidden Erosion of Purchasing Power: Inflation gradually reduces the purchasing power of your money, meaning the same amount buys less over time.
Unequal Impact on Different Goods: Inflation doesn't affect all goods and services equally. Prices may rise more rapidly in certain sectors, leading to disparities in the cost of living.
Impact on Savings and Investments: Inflation can erode the real value of savings. Investments may need to outpace inflation to maintain or increase their real value.
Uncertainty in Planning for the Future: High or unpredictable inflation can create uncertainty, making it challenging for businesses and individuals to plan for the future.
Consumer Behavior Changes: Inflation can alter consumer behavior, leading to shifts in spending patterns and preferences as individuals adapt to changing prices.
Government Debt Dynamics: Inflation can affect how much the government owes. While it might make the debt seem smaller in terms of what it can buy, it can also create problems for the overall economy.

There were still some parts we discussed on a shallow ground, but couldn’t do that effectively because of time, but indeed it was a really nice and eye-opening conversation.

In other words, the piece of land you bought years back at a price adjusted for inflation would merely be generating at a lesser unrealized profit than expected.

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Photo Credit: Premium Times Nigeria