Grace MoranThis is strictly for educational purposes and any investment decision you make based on this article isn’t and will not be subjected to us. Make your thorough research before investing.
What is inflation?
Inflation is simply the rate of increase in the prices of goods and services. It can happen for a variety of reasons, such as an increase in the cost of producing those goods and services, or because demand exceeds supply, all of which lead to price increases. As a result, more money is required to have more purchasing power.
In this case, several factors contributed to the inflation, including the reopening of businesses due to the pandemic and the current Russian/Ukraine war, among others. However, I am not going to focus on the causes and the reason, No.
We will focus on how it affects the savings you have been accumulating for a while and how it can indirectly affect your emotions and the way you channel those emotions towards your family and other people around you.
How inflation affects savings
Along with price increases, inflation can have a significant impact on your savings, as well as the money you set aside on a regular basis for unpredicted emergencies. In extreme cases, a strong savings account should have enough money to cover the next 3 to 6 months of daily expenses, assuming you have already established an investment portfolio. During an inflationary period, your expenses will inevitably rise, affecting the amount you need to save to keep up with the rise.
This can be mentally draining because you have to deal with increased prices in your everyday spending such as bills and groceries while also trying to maintain your savings account in order to have more purchasing power in the future when it is needed.
How it affects your mental health
Inflation is not always associated with declines in mental health. The impact on individuals is entirely dependent on their financial situation – for example, people whose salaries or incomes go to important expenses such as food and gasoline are more likely to suffer than any other class, while an individual in debt can benefit from inflation because each dollar they have to pay back is worth less than before, effectively reducing their debt.
This is the prime case with inflation because it isn’t a short crisis that we can just ride out and it doesn’t get easier with time, in fact, the consumer index has been on a constant rise for the past 2 years, Higher than it has ever been in 40 years.
This can continuously cause a strain on the human brain as we try to adapt by giving up the things that bring us happiness like going to the movies, buying a particular ice cream, or simply going out for dinner in that perfect restaurant you love.
These mentioned above are just the common cases.
Now when we talk about extreme cases like your family or loved ones in need of something or in case of an emergency that you can easily afford, previously but due to inflation, now find it hard to even do the minimum in these aspects (this is assuming your income doesn’t keep up with inflation).
All of these aspects can eventually affect the psychology of an individual which can lead to different types of results, however, the results will vary from people who are able to handle it extremely well to those who won’t which will spill directly with the way they interact with the people around them.
Don't get me wrong: I'm not writing this to say that everyone will develop a mental illness or become toxic. I'm bringing this up to prepare you to recognize when you're unconsciously feeling or acting differently toward people you normally interact with, and to be able to mentally disconnect those feelings and behavior by reminding yourself that it's not their fault you're in those situations.
You can also avoid these problems by having an active investment portfolio.
Check out our other article on how to Secure your Investments against Inflation with these 7 Simple tips if you an investor.
