Portuguese 
English 
Spanish 
4 min of reading 
We Talked A Lot About Inflation, But Do You Know What It Is? Learn How To Make Your Financial Planning Considering Inflation And Its Impacts!
Inflation is one of the most used terms in the financial market and in discussions of the country’s economy. This word is present in our daily lives, but do you know exactly what it means and what its impacts are?
To clarify inflation better and know how to consider it in your financial planning, we created this text explaining the impacts of inflation in Brazil and even what its benefits are.
But After All, What Is Inflation?
You probably know that the value of money changes over time. Remember when you were a child and bought a Trident for R$1.00? Nowadays, it costs around R$2.50.
-
Lula responds directly to Trump and says that Pix is from Brazil and will not change under pressure from anyone, after a report from the United States pointed out the Brazilian payment system as an American trade barrier.
-
Amazon has just announced a new fee on all deliveries, and your online purchases will become more expensive starting April 17, including for those buying from the United States here in Brazil.
-
He sold his share for R$ 4 thousand, saw the company become a giant worth R$ 19 trillion, and missed the opportunity of a lifetime.
-
Elon Musk’s Starship megafrocket puts $8 billion at risk, raises alarms in the market, and could affect technology, mining, and space internet startups in the coming years.
In other words, your purchasing power changes over time. A salary of R$4,000 could have been considered very good in the past. However, as prices have risen, this salary is no longer that interesting.
This is inflation, the increase in the price of goods and services as well as the decrease in the purchasing power of the consumer.
Inflation in Brazil: How It Works
In practice, inflation in Brazil determines salary increases, price variations of products and rents, and serves as a basis for determining interest rates and financial investments.
IBGE – Brazilian Institute of Geography and Statistics calculates the official inflation indicator in Brazil, called IPCA – Broad Consumer Price Index.
There are several factors responsible for inflation, such as the growth in demand for goods and services, the increase in production costs, and even the issuance of paper money by the government.
Impacts on Your Financial Planning
Inflation has a significant impact on your financial planning, especially if you make long-term plans.
Imagine that you are saving to live alone, for example, and you plan to save enough in two years. However, you must consider that the value of money changes in two years, as does the value of rent and household bills.
Therefore, always consider inflation in your planning and include an extra cost margin in your budget.
Change in Purchasing Power
The first impact perceived by Brazilians is the change in purchasing power. Considering the example given in this text, with R$5.00, you could buy five Tridents a few years ago. Today, you can only buy two.
In other words, money has lost value. This primarily impacts people who do not usually have their salary adjusted, such as some public employees, for example.
This is one of the most negative sides of inflation. Rarely does salary increases actually keep pace with inflation, making it more difficult for people to shop in the market and pay their monthly bills.
Increase in Product Prices
This also means that there is a general increase in product prices. Which wouldn’t be a problem if salaries rose proportionally.
But in practice, inflation mainly harms the poorer segment of society who cannot keep up with this price difference.
Reflection on the Country’s Economy
Inflation has a direct reflection on the country’s economy. When it is very high and prices rise, people cannot buy at the same speed as before, and the economy stops growing.
In countries like Argentina with very high current inflation, it is not worthwhile for citizens to invest money to buy a car, for example, because in a month it will already be worth much more.
In other words, inflation also shapes people’s lifestyle because they take actions based on what is financially more worthwhile.
After All, Is Inflation Always Bad?
When inflation grows according to the country’s target and what the population expects, it is beneficial and represents the warming of the economy. The problem is when hyperinflation occurs, with very high rates that the Selic cannot control.
However, there are cases where inflation is not entirely negative, and it is important for you to know its advantages to take advantage of its benefits. If you want to apply for a loan, for example, interest rates may be lower.
In other words, try to use inflation to your advantage to enjoy the benefits it can bring.
Final Considerations
Now you know what inflation is and how it works in Brazil. You also learned about the impacts of inflation on your financial planning and how much it affects your purchasing power and the increase in prices of goods and services.
So, don’t forget to consider inflation in your budget to avoid negative surprises.
About Juros Baixos
For more than 5 years in the market, Juros Baixos is a fintech that operates by offering financial solutions through a credit marketplace and financial wellness platform.
If you want to access more content about financial education, be sure to check out the Juros Baixos blog and our channel on YouTube.
Seja o primeiro a reagir!