GOAL COSTS
Today's price is not tomorrow's goal amount
General education for India · Reviewed
Inflation reduces purchasing power. A future goal should therefore have an explicit price assumption, rather than silently using today's cost.
Use one consistent calculation
For a single future payment:
Future cost = Today's cost × (1 + annual inflation assumption)^years
For a fictional ₹10 lakh goal ten years away, the result is approximately:
| Annual cost increase | Future cost |
|---|---|
| 4% | ₹14.80 lakh |
| 6% | ₹17.91 lakh |
| 8% | ₹21.59 lakh |
These are scenarios, not forecasts. A course fee, medical expense and household grocery budget need not rise at the same rate. Revisit the actual price when new information becomes available.
Avoid counting inflation twice
If the amount entered already represents the expected future price, do not increase it again as though it were today's price. Similarly, keep investment-return and spending assumptions consistent: a nominal return includes the effect of changing prices, while a real return measures purchasing-power growth.
The exact relationship is:
Real return = (1 + nominal return) / (1 + inflation) − 1
With hypothetical nominal growth of 8% and inflation of 6%, the real rate is about 1.89%, before any additional tax or cost effects not already included. Simply subtracting gives an approximation, not the exact result.
Try in ArthaCanvas: check the goal's date and cost basis, then compare inflation scenarios under Assumptions. Do not interpret a smooth projection as a promise that markets or prices will move smoothly.
Further reading: SEBI: Inflation. Calculations above are independently generated illustrations.
General education, not personal investment, insurance, tax or legal advice. Examples are not quotes or promises. Check current rules and seek qualified help where needed.