Inflation

The overall increase of prices, and the overall decrease of the value of money. Accounting for infaltion is critical to your future financial security.

Example

Suppose you are planning your retirement and determine that you need $75,000 per year to live comfortably. If you forget to account for inflation, you could be in a bad shape! After all, in 20 years, asuming 3% inflation, you will need about $132,000 in order to purchase what $75,000 can buy you today.

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