Saturday, September 29, 2012

Inflation And Its Impact On Working Individuals

Inflation, like any other financial crisis is often stretched over a long duration of time. It may last for a year, and maybe for a decade. It not only affects individuals, but also corporations and businesses in general.
Inflation is nothing but the rising cost of money. In simpler terms, if a pack of chips cost 10 bucks five years back, it now costs15. This is nothing but a 50% rise, and the rate of inflation of goes up due to such price rises of essential commodities like food, transportation, etc. The understanding of the concept of inflation is a must for every individual, as it affects everyone. From working individuals to non-working ones, whoever is a consumer of any kind of services or purchases any goods, is affected by inflation.

What causes inflation?
Inflation is not a phenomena caused due to one element. It is an outcome of several different aspects coming together. Firstly, unemployment is one of its root causes. With the rise in unemployment, there are lesser income generating individuals, and hence, the lesser will be purchasing power in numbers. When lesser individuals will purchase products, the production of goods will go down. Thus, resulting in a price rise.
Secondly, the most important aspect is rise of price due to policies and related factors. When a governing body passes a motion of increase in taxes of any kind, the producers and manufacturers try to retrieve the same from the consumer. Thus, this results in only the high-income group purchasing certain products, whereas those belonging to low income groups look to spend prudently and wisely.

Inflation’s impact on working individuals

Working individuals in most cases are salaried professionals. They try to make ends meet with every passing day. For them, the cost of an essential commodity like food grains, and luxury items like perfumes, both are of utmost importance. These things simply feature very differently on the priority list.
Usually, when inflation strikes, most individuals fear about their job safety. This is because organizations are equally affected by it and are looking at reducing costs. For them, the easiest way to reduce expenses is by sacking employees, especially high paid ones. Therefore, inflation creates fear in the minds of working individuals.

When there is a price rise, especially in the cost of essential items, an individual’s expenses rise. Most of them have budgets set for each month. These spending budgets at times are extremely tight and well planned. Alterations in the same may require careful planning. In times of inflation, individuals need to spend more, as one has to bear the cost of essential supplies like food, transportation, electricity, etc. This impacts one’s saving patterns, as now lesser income can be added for savings each month.

Finally, for a working individual who is a young entrepreneur, high profits in a business is the only aspect, which motivates him/her to expand and grow the business. During times of inflation, most businesses face lesser profits, at times maybe to a situation of no profit or no loss, or maybe only losses. This results in many new businesses shutting down, or maybe losing their market reputation.

In this way, inflation not only affects a country or a society, but also young individuals at the micro level.

Molly Biggs is the author of this post. She provides fast and efficient payday loans service to help people manage all their daily expenses and fulfill all their requirements.

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