Today is the best time to spend

The financial world is full of suggestions like how to save, how to borrow and how to invest your money. But nobody tells how and when a person should spend that money. One person always either save his money or borrow money for their expenses. These things are good up to some extent. For example, if you save a certain percentage of your income for future obligations so that financial burden will be less in the future on you if you purchase a house or a car. Because that requires a large amount of money than your income. But more than that savings and borrowings are at a questionable stage.

In developing countries, inflation remains in between 6 to 8%. In your financial planning, it is your friend and enemy both. But one can handle it more wisely if he understands its implications in the past, present, and future. For example, if one person have Rs. 1000 5 years back suppose in 2012, and now it becomes Rs. 1400 by investing it in 2017 and after 5 years i.e. at 2022 it will be Rs. 2000. Actually, its face value changes in these ten years but its purchase value remain the same. It means if you purchase something in 2012. It will benefit you at least more opportunity for you. Because you can use that product in the past. So saving for future use will give you opportunity loss to you.

Here one thing is also to note that the actual inflation rate will become 1½ x inflation, because of lifestyle or technology changes. For example after the digital revolution peoples phone bill and internet bill increase or added in the previous life. So people need more money to live. Thus actual inflation becomes 1½ x book inflation.

Actual inflation = 1½ x book inflation (inflation index)
So if a person uses his money in the future. It will give you less valuable product in the future than the present. In the above example, if a person can purchase 2 pan drive of 1 GB (which are more advanced or popular) in 2012 and if he saves it up to 2022 and then purchases pan drive in Rs. 2000 he can purchase 2 pen drive of 4 GB (which are less popular, this time 16 GB pen drives are more popular their cast almost Rs. 3000). Thus as per lifestyle inflation, one gets the lower product in the future for the same amount.

Now discuss the case of borrowing in financial planning. As per banking system, home loan and car loans are cheaper than other loans like personal loan, two wheeler loan and electronic goods. Home loan and car loan’s interest roles are normally near to 1½ of inflation or actual inflation. So these products are good to borrow their present and past cost are the same. While other loans like mortgage loan, personal loan, and electronic goods loans interest roles are about 2 times of inflation. Thus these are costly if one gets and expense in the past. Besides this these also gives tension or headache of EMI. So past expenses through borrowing are also a costly affair to spend.

Thus the best time to spend money is present where you do not have a headache of investment checking and EMI. It also gives the best product to use as per popularity at that time. It also gives the opportunity to make better present time. Thus live in present, spend in the present and make your life good and not go afterwords of wealth creation without thinking.