Does Inflation Affects my life?

I think most OFW like me don't care about the INFLATION, because some of us don't know how it affects our life or maybe they know but felt helpless about it. The only thing we care is how much the "US Dollar Exchange Rate to Philippine Peso" every end of the month and I think, I'm not alone with this kind of attitude about inflation. But, when I start my journey on my financial freedom, reality stuck on me! If I want to be financially stable, I must care about inflation. 

The good thing is that we can do something to lessen or fight the effects of inflation into our lives, unlike the Dollar Exchange Rate to Peso that we are really helpless about it.

What is Inflation?

According to Wikipedia the meaning of inflation is:

"In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.^[1] When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.^[2][3] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.^{[4]" by:} http://en.wikipedia.org/wiki/Inflation

Example:

                                           

An advisory from the Department of Trade and Industry

Price Guide as of June 14, 2011

COMMODITY	PREVAILING PRICES MONITORED IN 25 NCR WET MARKETS
	SRP	A WEEK AGO; June 3, 2011	CURRENT PRICE; June 10, 2011	LOWEST PRICE; June 10, 2011	June 10, 2011
1. CANNED SARDINES in tomato sauce, 155g
555		12.00	11.00	12.00	Paco Public Market, Manila
Young’s Town	12.50	12.00	12.00	11.50	Malabon Central Market
Ligo	-	12.00	12.00	11.25	Malabon Central Market
Mega Sardines	13.00	12.25	12.25	11.75	Muntinlupa Public Market
Master (Green & Red)	12.50	11.75	11.75	11.70	Galas Public Market, Quezon City

Data Source: http://www.gov.ph/2011/06/14/price-list-for-selected-basic-necessities-and-prime-commodities-as-of-june-14-2011/

WEEKLY PRICE MONITORING REPORT OF BASIC NECESSITIES AND PRIME COMMODITIES  IN WETMARKETS
NATIONAL CAPITAL REGION
JANUARY - DECEMBER 2012
BASIC NECCESSITIES & PRIME COMMODITIES	JANUARY	FEBRUARY	MARCH
CANNED SARDINES in tomato sauce, 155g
555	12.00	13.00	13.00
Family	12.75	12.75	12.75
Young’s Town	12.50	13.00	13.50
Ligo	13.00	13.50	14.00
Mega	13.00	13.00	13.00

Source: http://www.dti.gov.ph/dti/index.php?p=39 (Bantay Presyo Monthly Prices 2012)

Using the above data:

Let say, you have a savings of Php5,000.00 last 2011and if we  use that savings to buy 555 Sardines at June 10, 2011 Price

        Item                          Price              Quantity            Amount                  Difference

  555 Sardines                Php12.00           416 pcs           Php4,992.00            Php8.00

Considering that you did not spend your Php5,000.00 savings and you just keep it in the safe place in your home and after 9 months you want buy a 416 pcs of 555 Sardines. To translate the 9 months, it will be March 2012 Price we must use. 

        Item                          Price              Quantity            Amount                       Difference     

  555 Sardines                Php13.00           416 pcs           Php5,408.00               Php-408.00  

As you can see when you buy the same quantity of 555 Sardines after 9 months the price are not same and that is the inflation.