My personal inflation rate is higher than headline inflation of 8.6%

  • Everyone is freaking out over the rising cost of goods and services due to inflation.
  • A financial planner recommended that I calculate the true cost of inflation.
  • My personal inflation rate is 14%, even though I’ve spent a lot less on groceries this year.

My Instagram and TikTok feeds are filled with inflation memes. Living in Los Angeles, my friends and I joke about rising gas prices — now $7 a gallon or more in some areas — to cope with the stress of making ends meet.

Some of our collective panic is justified. Inflation, defined as the increase in the cost of goods over time, is the highest in 41 years. The average annual inflation rate in the United States is around 2%, however, due to supply shortages during the pandemic, the inflation rate from May 2021 to May 2022 is 8.6%.

How I calculated my personal inflation rate

I spoke with financial planner Nicole Morong of Peterkin Financial about my concerns about inflation. She told me, “The way I approach inflation with my clients is, first, we have a conversation about the actual inflation rate for things like mortgage rates, credit cards, l gas and groceries. is the rate of inflation, which is based on what you are personally going through.”

To calculate headline inflation, economists compare the average cost of goods and services year over year, for example, May 2021 versus May 2022. Similarly, Morong told me that I could calculate my personal inflation rate by comparing my spending in different categories year-over-year using this equation:

My personal inflation rate from May 2021 to May 2022 is 14%

Before I jumped into analyzing my personal inflation rate, the practice of comparing my growth from year to year was so satisfying. In a world where we are trained to constantly compare ourselves to others on social media, it was healing to only compare myself to myself.

My monthly income increased by 46% from 2021 to 2022, and my rent increased when I moved from an apartment with roommates to my own one-bedroom apartment. Sometimes I still feel guilty about the rent I’m paying compared to people who live in cheaper cities, but it feels good to know that the 45% increase in rent I’m paying is commensurate with the increase in my income.

I spent less on groceries and takeout, but I spent more on gas

Getting insight into your personal inflation rate can help you understand how well you can counter headline inflation with small, manageable lifestyle changes over time, Morong says. I was surprised to learn that I was already taking these steps with my grocery spending down 40% and takeout spending down 71%.

Morong says, “Even though groceries have gone up in value, you may have subconsciously taken on different habits, and your personal inflation rate is stable when it comes to groceries.” She adds that most of her customers are cutting certain categories by making small changes, like having meatless dinners on Mondays or going out less to compensate for inflation.

My gas costs went up 50%, but May was a lean month. So in June, when I usually go out more for Pride month celebrations, I spent $235.67 on gas compared to $72.12 last year, a whopping inflation rate of 227%. Part of the reason my gas costs have gone up is because I moved to a less central area where the rent is cheaper, but a lot of that is due to skyrocketing fuel costs.

Understanding my personal inflation rate gave me a much-needed reality check

Seeing that number – 227% increase for gas from June 2021 to June 2022 – gave me some much needed reality. Spending time with my friends and my community is very important to me. To make room for the cost of gas in my budget, I’m making small cuts in other areas.

While I take responsibility for what I can control, I always make room for cathartic jokes and whining about inflation in general. The best meme I’ve found is the one that says, “Gasoline prices are higher than some of your credit scores.” I have the privilege of having a steady job and being able to weather the storm of paying $7 a gallon for gas, but I will never argue that it’s fair to pay that much just to live in a city that I love.

Leave a Reply

Your email address will not be published.