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It’s easy to learn the inflation rate, it’s published monthly, generally the CPI- W applicable to retirees. But what really counts is your individual rate because you may or may not be affected by the components of the index.
Years ago I signed up for and received my individual monthly inflation rate – based on a questionnaire- from the Federal Reserve. Then the message just stopped coming.
In any case, it might be interesting to build your own inflation rate based on what items mostly apply to you
For example, we don’t rent, but we pay property taxes whose increase rate are capped in our state. Our health care expenses are pretty much limited to premium increases, but that may not be the case if there is a high deductible.
Feel free to use a spreadsheet for the exercise 😁🤑😁
Several years ago I read about five different measures of inflation and my eyes glazed over. I have used a crude measure of my personal inflation rate. I looked at the annual increases in my actual spending from year to year, and it has exceeded the “official” rate by 2-3 percent. One reason may be that I don’t buy all the same items in the hypothetical basket of goods or in the same proportion as used by economists to calculate the rate. Also hedonic increases (buying pricier and or “better” replacement items and even new items which didn’t exist before). But you are certainly right that it is the personal inflationary rate that you are actually paying so its worth attempting to estimate it, however imperfectly.
Maybe the Fed ran out of money. LOL.
That’s true and everyone’s experiences differ. However, separating lifestyle changes from what we call “inflation” can be difficult. I view inflation or annual cost increases as possibly detracting from funds available for other purposes.
For example, in 2023 I did no travel. In 2025 we just completed a 7,000 mile, multi-month trek via RV. In 2022 we owned a condominium, a “cabin” in Michigan, a 41+ ft stationary RV in Arizona, a Class B and early in the year two automobiles. We were living at three primary locations during the year and travelling.
Each of the above incurred annual expenses. The condo had real estate taxes and HOA fees to pay. There were site rents in AZ and MI, and there was insurance on each. Each RV and vehicle and abode were insured.
I managed this by categorizing expenses by location. One auto at the condo, and one in AZ, etc. I knew precisely how much we were spending with our nomadic lifestyle.
In 2023 and 2024 there were significant medical and dental expenses, much greater than in previous years.
Today we have reduced our primary locations to two. We own a home in an AZ resort, the “cabin” in MI, one automobile and a Class B RV. There are no real estate taxes or condo fees to pay, but we have added several hundred dollars each year for “property taxes”. Site rents have been reduced simply by reducing the number of “lily pads”. Similarly, utilities have been reduced, too. On the other hand, we’ve spent some large sums on “home maintenance and repair” both in MI and AZ.
G is now on Medicare which has changed her annual insurance premiums for the better.
We have been dining out more. With serious illness there have been other lifestyle changes. I use contractors more. G frowns on my climbing on the roof. My muscle mass has been seriously reduced and with it my strength and stamina. Fortunate for me, the exercise room is included in the resort fees.
Another change. G flies across the country three or four times each year to help care for her elderly mother, but we don’t include this as an annual living expense.
I could create a spreadsheet, or run any number of Quicken reports, but what really matters is total expenses per year versus income. Why? We are no longer attempting to save for the future. In the past any excess income was stashed away.
I’ve plugged in all of the known expenses. I know my Total Spending for the year, What’s Left and Projected Balances for the spending accounts. The balance will increase by 91% on 12/31/2025.
Today the primary objective is wealth preservation and not exceeding the funds in our lifetime.
EXTRA EXTRA READ ALL ABOUT IT
RDQ FINDS A USE FOR SPREADSHEETS
I’ve thought about personal inflation, but never tried to calculate. A quick Google search turned up a bunch of calculators. Sounds interesting, I may play around with them.
🤣
Inflation has puzzled me over the last few years. Headlines scream continually about the cost-of-living crisis and super-high inflation. Because I ran my own business, I basically set my own compensation package. During the two years of raised inflation and continuing into my first year of retirement, I haven’t increased what I pay myself. Inflation is universal and obviously must be affecting my purchasing power, but no inflation increases have been required for the third year now. A puzzle indeed.