Inflation: a reason to manage your finances wisely, save and invest.

Mirembe, good and faithful servant! Takáji, light!

How are you any different from those in the world, if you speak like them, act like them and dress like them? How are you any different from them, if, like them, you speak without restraint, without wisdom, without grace? How are you any different from them? ‘Learn to be truthful, wise, disciplined and intelligent, and do not squander these qualities.’ (Proverbs 23:23, fluent french Version) What matters is not how much money you have, but how you use it. Honour GOD and He will honour His promise. Honour GOD and He will bless you.

❖ The people will curse him who withholds grain, But blessing will be on the head of him who sells it. (Proverbs 11:26, NKJV)

❖ He who trusts in his riches will fall, But the righteous will flourish like foliage. (Proverbs 11:28, NKJV)

Inflation is a general and sustained rise in the prices of goods and services. This situation corresponds to a decline in purchasing power. In other words, with the same amount of money, one can buy fewer things than before. Inflation can be cost-push, demand-pull, monetary, and/or imported. The causes may be combined (simultaneous). In contrast, deflation refers to a widespread and sustained decline in prices.

Cost-push inflation is caused by rising supply costs and/or production costs (raw materials, energy, transportation, wages, equipment). Demand-pull inflation occurs when demand (those who want a product or service) exceeds supply (products or services available for sale).  Money-supply inflation is caused by an excess of money in circulation (too many banknotes printed). Imported inflation is the increase in the cost of imported goods due to the depreciation of a currency against the U.S. dollar and/or major international trade currencies (the euro, the yuan, the pound sterling, the yen). This increase affects all sectors, as certain imported goods serve as components, raw materials, energy sources, or basic commodities in importing countries. This rise can also be caused by conflicts, the termination of international agreements, or a series of natural disasters.

Examples:

• €100 in France in 2016 is equivalent to €117.47 in 2024, representing a cumulative increase of €17.47 (17.47%). Over this period, the average annual inflation rate is 2.03%.

• Suppose the expected inflation rate over the next 5 years is 2%. A sum of €100 today will be worth €90.91 in 5 years. In other words, this sum will only be enough to purchase goods worth €90.91. The €100 item will cost €110.00.

One consequence of inflation is that it leads to a decline in the savings rate for those whose incomes do not rise at the same pace as, or at a rate higher than, inflation. Inflation reduces the savings rate of those who lack discipline in their spending.

Inflation has positive effects on investments. Suppose someone buys a piece of land this year for 100 euros. If inflation is 2% this year, their house will be worth 102 euros. If, in addition to inflation, the neighborhood has appreciated in value, the price of their house will be significantly higher than 102 euros.

As long as it remains low, inflation is considered good for the economy of a country or region. It is therefore sought after, monitored, and, if possible, controlled by governments. Inflation impoverishes some and enriches others. Those who have managed their finances well or made sound investments benefit from it. Those who have mismanaged their finances or made poor investments suffer as a result. I like to say that change is a constant, in the sense of progress. Change is a constant. Either we anticipate it, adapt to it, or suffer through it.

Don’t assume that what is cheap today will remain so. Nor that what is expensive for you is expensive for others or will be expensive for others. Prices will not always be what they are today. The situation may reverse; what is expensive today may not be so tomorrow. Prices can go up or down. We don’t know what they will be in five years. But we know what is written in the Word: manage your resources well, save, and if possible, invest. Yes, GOD works miracles. Yes, we are called to live by faith. But let us not try to make the Scriptures say what GOD does not say. Living by faith means following GOD’s principles, instructions, and guidance. It does not mean mismanaging one’s finances while expecting money to suddenly and miraculously appear in one’s bank account.

The question isn’t so much how much prices will rise or fall. It’s whether we’ll be ready when it happens. If, in ten years, the university or private school you want your children to attend raises its tuition, will you be ready? If, in three years, that idea, product, software, invention, or business were to be created, would you be ready? You want to build a villa, a school, a hospital, or an orphanage. If in five years the opportunity arises to buy a good piece of land—large and well-located—will you be ready? If you aren’t, others will be. Some projects can be launched with just a little money. Others require significant sums right from the start. Will you be ready when that happens?

** Mirembe = Hello (Hi) in Lunyoro (Uganda) and Luo (Tanzania, Kenya)

** Takáji = Good afternoon in Taíno (Jamaica, Cuba, Puerto Rico, Haiti, Dominican Republic)