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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late....

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late.
Inflation does not take away your capital visibly. It does not reduce the number in your bank account. Instead, it reduces what that number can buy. A Rs 100 note today buys far less than what it did ten years ago. This gradual and relentless decline is what truly destroys long-term financial security. The real damage happens when people invest in financial products that earn less than 10 per cent returns, especially over long periods. India’s long-term inflation averages around 6 to 7 per cent. When you add lifestyle inflation - the rising cost of healthcare, education, housing, travel, and personal aspirations - your effective inflation rate is often much higher. So, if you are earning 5 to 8 per cent on your money, you are not growing your wealth. You are moving backward. This is why low-yield products, despite feeling safe, often end up becoming wealth destroyers. Your money appears protected, but its strength - its ability to buy goods, services, experiences, and opportunities - is weakening year after year. Fixed-income products like bank fixed deposits and recurring deposits are essential, but only for short-term goals within the next three years. Beyond that period, the returns simply do not keep pace with inflation. A few products are a financial mess - they are locked in for the long term with poor liquidity and still give less than 8 per cent returns, which creates major problems in your financial goals journey. To genuinely grow wealth, your investments must consistently outperform inflation and achieve more than 10 per cent returns. For long-term financial goals - whether 5, 10, or 20 years away - only a few asset classes have historically achieved this: Direct stocks Equities represent ownership in businesses. As companies grow their revenues and profits, shareholders participate in that growth. Over long horizons, equities remain one of the most reliable inflation-beating asset classes. Equity and hybrid mutual funds These funds offer equity-debt-gold diversification, professional management, and disciplined investment structures that are essential for long-term compounding. Gold Gold has been a time-tested hedge against inflation and periods of economic uncertainty. Ultimately, financial planning is not about protecting your principal. It is about protecting and enhancing your purchasing power. That is what funds your child’s education, your child’s marriage, your retirement lifestyle, and your long-term dreams. Inflation does not announce its arrival. It works silently. The only defense is intelligent asset allocation and a long-term investment mindset. Your money is supposed to work for you. Make sure it continues to do so - not just in numbers, but in real value. (The author is a Chartered Accountant and CFA (USA). Financial Advisor.Views personal. He could be reached on 9833133605.)

Food Waste in India’s Hospitality Sector

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In my last article, I shared an overview of the wastage of food at the household level. Now, let us move out of the house and look at other sources of food waste by retail consumers. Topmost among the sources are hotels and restaurants. According to the Food Waste Index Report 2021 by the United Nations Environment Programme (UNEP), India generates about 68.7 million tons of food waste per year, out of which 11.9 million tons come from the food service sector. This sector includes restaurants, hotels, caterers, canteens, and other establishments that serve food to customers. There are three different modes of food wastage in this sector. Firstly, pre-consumer waste is generated during preparation and storage. Then when the food is served to the customer as per the order, many customers leave some portion of the food in their plates. Many customers prefer to carry packed meals at home or their respective workplaces. However, they may not consume the entire portion of food they have carried. The reasons for food waste in restaurants and hotels are manifold and can be summarised as follows:


  1. Overproduction: Restaurants often prepare various food dishes in excess quantities to avoid running out of stock and to meet the demand of customers. However, they do not consider the average number of customers visiting their restaurants per day. Hence, all the food that is prepared does not get consumed and becomes stale. Such food is discarded in the trash.


  1. Serving portion quantity: Restaurants often serve large portions of food to customers to attract them and satisfy their appetites without even considering their age. People who are in their late 60s and 70s and above do not have such an appetite, but they are served the same portion as given to the youngsters and adults. In general, the said customer may not be able to gulp down the entire food on the plate. I have experienced this many times. For a single person, they serve a portion of food that can be shared by two or three people. So obviously, some food gets left over. The customer may get it packed and take it home, thinking that it will take care of one meal at least. But it rarely happens. Such packed food is kept in the refrigerator and is then discarded the next day.


  1. Customer behaviour: On the contrary, customers often order more food than they can eat or need, either due to a lack of awareness, peer pressure, or impulse buying. They also tend to leave uneaten food on their plates or take away leftovers, but do not consume them later.


  1. Menu variety: Restaurants often offer a wide variety of dishes and cuisines to cater to the different tastes and preferences of customers. However, this also increases the complexity and cost of food preparation and storage, as well as the risk of spoilage and wastage.


  2. Lack of awareness: Both restaurants and customers often lack awareness and knowledge about the causes and consequences of food waste, as well as the best practices and solutions to prevent and reduce it. They also lack incentives and motivation to act against food waste.


More on this next week! Till then, have a good weekend!


(The author is an environmentalist. Views personal.)

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