Rising Government Spending and Its Global Impact

In recent decades, government spending per capita has significantly increased worldwide. For example, in the US, spending has risen from nearly $7,000 to $27,000 per person over the past 40 to 50 years. This trend includes federal, state, and local spending. While the data may be specific to the US, it reflects a global phenomenon. Many governments are spending more than they earn, leading to fiscal deficits. Few countries today operate with a surplus, meaning they are spending more than they generate through taxation.

Political Influence on Spending

The primary reason behind this increased spending is political. Governments, with their four- or five-year terms, need to ensure their re-election. To do so, they often offer subsidies, benefits, and other financial incentives to appeal to voters. This is not just happening in one country but across the world. Politicians use such tactics to secure votes, but this trend is contributing to a bigger problem—fiscal imbalance and economic challenges for citizens.

The Hidden Cost of Inflation

One of the most serious consequences of increased government spending is inflation. When governments overspend, inflation tends to rise. Many people, especially in countries like India, depend on low-risk investments such as bank fixed deposits (FDs) for their savings. However, the interest rates on these deposits, especially after taxes, are often lower than the actual inflation rate. Officially, inflation may be reported around 5%, but in reality, it could be much higher. As a result, people’s savings are losing value over time due to what can be called the “secret taxation” of inflation.

The Challenge for Savers

Savers are being hit hard by this situation. While inflation eats away at the value of their money, taxes continue to rise. People who are not investing in assets that can counter inflation, such as real estate, gold, or equities, are losing out. If your money is just sitting in a bank account, it is not growing—it is, in fact, shrinking in real value. This is a serious issue, as simply saving money in a low-interest account will not protect your wealth over time.

The Importance of Investing Wisely

To protect your wealth and beat inflation, you need to consider taking calculated risks with your money. Gradually shifting your funds into investments such as stocks, gold, or real estate can help you stay ahead. For example, if you have all your money in the bank, you can start by allocating 20% to other investments. Over time, you can increase this to 40%, then 50%, or more, depending on your risk appetite.

Don’t Let Your Money Sit Idle

In today’s world, letting your money sit idle in a bank is like moving backward. Inflation continues to erode its value, and without proper investments, your savings will not grow. If you want to stay ahead financially, you need to make your money work for you. Gradual investment is the key to ensuring that your wealth grows, even as inflation rises.

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