Cost of living is an economic term that relates to particular goods and services consumed to maintain a minimum basic life style and differ worldwide. This translates to the cost of running your household. Tracking your finances alone, may be fine to budget for fixed cost items but associating the money with other relevant records, such as usage and time, may be the only way to deal with constantly raising prices.Starting with the Basic Household expenses; Groceries (food & other household supplies), Health & Life Insurance, Education & Entertainment, Communication & Transport, Home Maintenance, Utilities. Most of which have recently changed from fixed price expenses to variable price expenses, because of volatilities in the pricing of essential inputs (all petroleum based products ) being no longer in a manageable range as to allow them to be absorbed into the consumers’ price. Hence, these bills are being calculated on a basic consumption unit with variable additional charges being passed directly to the final consumer. In such cases, the only budgetary control available to the consumer is to monitor the related consumption records.
Many workers’ unions are again taking the approach, at the collective bargain process, of a cost of living adjustment (COLA) to index salaries and wages to the raise in basic living expenses to enhance income levels but the general effect of higher salaries and wages has always been increased cost to the customer. Wage and salary increases can only be driven by higher levels of productivity, which in most cases will mean job cuts, few people doing more work. If you are one of the few to have been kept, do not be too happy, your additional income may well be spent on health issues.
Existing Credit Card Debt, Loans & Mortgages may have to be renegotiated to arrange for smaller payments, leaving more money available for those increasing basic expenses. This will only be possible by extending the life of current debts which mean you will be paying more interest charges overall. If you need new debt, I wish you luck in qualifying and adding that monthly payment from your existing stagnant income. Debt must be dependent on generating more income, so the question is, will what you borrow earn any additional income?
In an inflationary environment, your Assets; Savings & Investments need to be managed with a heighten level of skill and experience. Firstly, you need to understand that real assets generate returns that are greater than the inflation rate over the same period, so Cash Deposits that receive an interest rate that is lower than the present inflation rate is equivalent to paying out cash. Commercial property which generates rental income, shares in business which pays dividends or investment in mutual funds which offer income distributions and growth in value, all have the potential to beat inflation and give you additional income and the ability to pay higher bills.
The best way to control your cost of living is to demand “Value for Money”, by constantly examining your bills not by the amount of money charged but by your usage, such as the average number of electricity units used over the last year or your gasoline usage or any record that helps you evaluate your life style.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
