If you look at the top of this page, you will notice that the blog's title description is the same as this post's title.
Please allow me to briefly expand the meaning of it.
In the first sentence, the word "Tomorrow's Expenses Are Today's Investment" has profound meaning attached to it.
Here the word brings the reader to explore the meaning of future 'expenses' and 'Investment'.
Investment is explained as a portion of disposal income that have been allocated or parked in an investment scheme that generates an above average rate of return which is inflation adjusted. This simply means that the interest income from this scheme grows higher than the inherent risk of inflation. Here is an example.
If the published current inflation rate is 3.20%, and interest income bearing scheme of the investment generates a rate of return at 6.20%; than this is called an investment or also known as inflation rate adjusted interest rate.
What good then?
Well, undoubtedly your current cost of living will balloon in future due to inflation factor and if you have allocated some contingent funds to cover for the future expenses, than that fund should earn an interest greater than the inflation rate, otherwise you will get a negative net interest rate should the investment rate of return is lower than inflation rate. This will definitely deteriorate your future value of money and derail your anticipated contingent future funds that you have planned.
"Tomorrow's Expenses" means all current living cost brought forward to a date in future. Inflation rate plays an important role in determining the future living cost based on current scenario.
"Today's Investment" simply means that in the course of planning to cover the future living cost, some money needed to be invested (not saving) in an investment scheme that projects return more than the inflation rate.
Well, in the following second sentence, the word "Yesterday's Savings Are Tomorrow's Liability" in reality reflects back the first sentence in contrast. The difference between Investment and Saving is that, the former carries a return that is inflation adjusted, while the latter bears a non-inflation adjusted return. In a Saving scheme, the net return will always be in a negative regime. Hence, your contingent fund to cover all your future living cost will not be met, thus bring rise to a financial liability scenario.
So as you can see, the 2 key words in this context are "INVESTMENT" and "SAVINGS". And now that you are aware of their differences, decide well before investing!
Happy investing!!
