Inflation
Inflation and the Cost of Delay (Purchasing Power Explained)
Inflation reduces what money can buy. Waiting can mean less compounding time and higher future costs in “today’s money.” Here’s how to see both layers.
Published: December 22, 2025 · Updated: December 22, 2025 · By FinToolSuite Editorial
Model it in the calculator
Compare start-now vs start-later, then sanity-check goal costs in today’s money.
Quick answer
Inflation erodes purchasing power. Delaying doesn’t just shorten compounding time—it can also mean your goal costs more later. Estimate both with the calculator and an inflation check.
Estimate your personal inflationInflation in one minute
Inflation is the general rise in prices. “Today’s money” buys more than the same nominal amount later if prices rise. See more on real vs nominal in nominal vs real returns.
Two layers of cost
- Compounding/time layer: starting later gives less time to grow (modeled by the cost of delay calculator).
- Purchasing-power layer: goals may cost more later if prices rise (inflation).
Both are based on assumptions, not guarantees.
Simple example (2–3% inflation)
Goal: £10,000 in today’s money. Illustration: 5 years out.
| Inflation rate (illustrative) | “£10,000 today” ≈ in 5 years |
|---|---|
| 2% | ~£11,000 |
| 3% | ~£11,600 |
Illustrative only, not a forecast. Higher inflation or longer timelines increase the future “sticker price.”
How to model this on FinToolSuite
- Cost of Delay Calculator: compare start now vs start later with the same return assumption. Save scenarios (e.g., 6 vs 12 months). Open the calculator.
- Personal Inflation Basket Calculator: estimate your own inflation mix (housing, food, transport) and sanity-check goal costs. Estimate personal inflation.
Common pitfalls
- Mixing nominal returns with real goals (forgetting inflation).
- Assuming one inflation rate fits everyone.
- Treating an inflation scenario as guaranteed.
- Ignoring fees and taxes when thinking about net results.
FAQ
Does inflation increase the cost of delay?
It can. Waiting can mean less compounding time and potentially higher future costs in real terms.
What’s the difference between nominal and real returns?
Nominal ignores inflation; real adjusts for it. See nominal vs real returns.
What inflation rate should I use?
Use illustrative scenarios (e.g., 2–3%) and test a range. Inflation varies by country and household.
How do I account for inflation in a goal amount?
Estimate the future “sticker price” using an inflation rate, then compare that to your projected balance.
Can I include inflation directly in the cost of delay calculator?
The calculator models timing and growth. Use an inflation estimate separately to gauge future goal cost.
Why is my personal inflation different from CPI?
Spending mixes vary. Your housing/food/transport weights may differ from the headline index.
Are results guaranteed?
No. All scenarios are estimates based on assumptions; real outcomes vary.
Does inflation matter more over longer timelines?
Yes. More years allow price changes to accumulate, widening the gap in real terms.
Final CTA
Run two scenarios (start now vs start in 12 months) and then sanity-check your goal in today’s money with an inflation estimate.