Inflation measures the general increase in the price of goods and services. Simply put, that means: how much more expensive is your cup of coffee, jeans or gas compared to a year ago? The stronger the price rise, the higher the inflation. 

Decrease value
We also call this currency depreciation, because you can buy less with your money. So your money is worth less. The goal of the European Central Bank (ECB) is to keep inflation at 2%. This means that every year everything gets a little more expensive. For most people, a 5 cent price increase on a cup of coffee isn’t that bad. It only gets annoying if you want to buy this cup of coffee in 10, 20 or 30 years. Then an inflation of 2% does mean a significant decrease in your purchasing power. You buy considerably less with the same money.

Inflation is therefore also called the silent killer of your capital. You hardly notice that it is getting less. This is due to two things. First of all, because your money visibly stays the same. After all, you don’t have to pay or pay for inflation. Second, you don’t notice it quickly in your spending. Every year a little less is not noticeable. But after 30 years you are heading towards halving your assets. 

Is inflation a bad thing?
Central banks don’t think so. This is because the opposite is a lot more annoying. That’s deflation. This means that your cup of coffee gets cheaper every year. Good news right? You would actually like to say that, but it also means that you will postpone spending. Because if you wait a little longer, your new car will be a lot cheaper. Because producers still want to sell, they lower the prices even further, creating a spiral that is difficult to stop. It is also disastrous for the economy. Inflation of about 2% is therefore seen as healthy for the economy. But if inflation is a lot higher, then that creates another spiral: the wage price spiral. Due to the rising prices you expect compensation from your salary and the high salaries cause higher prices. 

What to do?
Most importantly, realize that your money spoils a little every year. You won’t be able to use a piece of your money that you have now in a year. If you need the money in the future, you have to make sure that it is maintained or maybe even grows. Saving is often not enough and more risk is required. Investing is often an important solution for most people in order not to let their wealth shrink too much. 

As a consultant, I help you make the right choices. Everyone has their own personal financial situation and that includes tailor-made advice. Please contact me for more information or book your appointment.

It’s time to build wealth! This can be done in various ways; save or invest. Or both. And of course it’s smart to start as soon as possible! This has everything to do with what Einstein called the 8th wonder of the world; interest-on-interest effect. 

How does it work?
Today we also know this effect through the Reproductive Factor of the coronavirus, the ‘R’. The higher the ‘R’ is, the faster the number of infections increases. This ‘R’ also exists on your savings account and when investing. The ‘R’ of return. The sooner you start saving or investing, the longer you will benefit from a high(er) ‘R’. It’s kind of a snowball effect. I’ll explain this effect with an example: 

Suppose you invest €5,000. You invest this for 20 years and each year you have 8% interest. Then you have:
In year 1: 8% interest on €5,000 = €5,400
In year 2: 8% interest on €5,400 = €5,832
In year 3: 8% interest on €5,832 = €6,298.56
In year 20: 8% interest on €21,578.51 = €23,304.79 

You started with €5,000 and after 20 years of investing you end up with €23,304.79. The return has done its job. 

Please note! This is an example.

If you have a clear idea of ​​what you want to build up capital for, it will be easier for you to stick to your goal. Few people withdraw money from their retirement investments to go on vacation. The children’s study fund is also left virtually untouched for a new PlayStation or winter coat. You may recognize such a situation and know that it is irresponsible to risk your pension or hinder the children’s studies. 

“Investing without a goal is like a cappuccino without milk!”

The great thing about this is that it increases your investment return. You respect the long term, act more rationally and take responsible risks with your money. This is how investing makes sense. 

My services are aimed at clarifying your goals and ensuring that you use your money in the right way, so that you can live with pleasure and in peace. Financial rest is your emotional rest.

Are savings deposits the solution in times of low interest rates?
If the risks of investing do not suit you, locking up money can help to make a reasonable return on your assets in times of low interest rates. This can be done, for example, in a savings deposit. 

Safe and yet more return
A savings deposit is a safe way of saving with which the capital returns better than with directly withdrawable savings. The bank has the certainty that your money will remain in the account for a longer period of time. This gives you a higher interest rate. 

Deposit guarantee scheme
Savings deposits are also covered by the deposit guarantee scheme. This means that the Dutch State guarantees amounts up to €100,000. Your bank must then fall under the system. This also applies to the savings product that you take out. 

Please note! Securing you money in funds really means securing.If you want to withdraw the money earlier than agreed, you will have to pay a fine.

How much?
Because your money is tied up, it is important that you first determine what amount you can miss for a longer period of time. Therefore, do not put all the free capital in a deposit, but leave part of the money in a freely withdrawable savings account. This may be necessary for larger purchases or unexpected expenses. 

How long?
Then look at your savings goal. Are you saving for a luxury holiday or do you want to make a trip around the world in a few years? Is the money intended for a new car or are you saving for the education fund of the children? The answer to that question determines whether you lock up the money for, say, six months, five years or twenty years. In general, the longer the retention period, the higher the interest rate. Please note, that interest remains the same throughout the term, even if the regular savings interest rate rises. And do you need the money in the meantime? Then you pay a fine that is at the expense of the return. 

What should you pay attention to?
If you compare providers, you will notice that the terms and conditions of savings deposits can differ greatly from each other. For example: 

• The level of the interest rate or the minimum term for the highest return (for forms of deposits with an interest rate that increases during the term)
• The term of the deposit
• The minimum initial investment
• The possibility to contribute
• The amount of the fine if you want to withdraw money in the interim. 

Terms in case of death
Some deposits are not released after death. This can be annoying if your heirs have to pay inheritance tax, but cannot access the money. 

Savings account?
Are you unsure whether securing money is the best choice for you? Do you always want to be able to withdraw your money without penalty? Then compare the interest of other savings accounts and providers with your current conditions. There is often a significant difference in the highest and lowest interest rates available on the market.

Investing with your annuity payment? You don’t do that, do you? You may think differently after reading this article. Glad you read it, because that alone gives you a greater chance of a better pension. Maybe you are just like so many Dutch people and you build up your own wealth for later. A large number of people do this through an Annuity. 

“With an annuity, you provide extra income in a tax-efficient way that you receive periodically from a certain moment, for example when you retire.” – Tax and Customs Administration website (Belastingdienst). 

Payment
You build up capital that you later use for your pension. Every year you pay into your annuity account until you retire. Suppose you have built up €100,000 and you want to pay out the annuity in 20 years. A simple calculation leads to a payment of €5,000 per year. However, this is not entirely correct, because you still receive interest on this € 5,000. So you still build up capital on the amount still to be paid out. As a result, the benefit may be slightly higher. The higher the interest rate, the higher the benefit is. interestThe interest is now the problem, because it is almost 0%. So you don’t build much. This has major consequences for your payments. Below you can see the payment for higher returns. 

Solution
I have been working with various asset managers for years and after intensive consultation with the tax authorities, they have made an agreement that you may continue to invest with your annuity payment. Investing can be smart to improve your pension. A return of 3%-3.5% per year can be possible in this respect. This therefore significantly increases your benefit. Of course, it depends entirely on your situation what is best for you and how much you can invest during your retirement. 

You can therefore continue to invest part of your payment and buy part with certainty. This way you benefit from financial peace with the chance of a better pension. I would be happy to inform you about the possibilities and opportunities.