Inflation is the increase in the price of goods and services over time. Simply put, you don’t get as much for your hard-earned dollar as you did before. Supply chain issues, surging demand, production costs, and the relief funds provided during the pandemic may all have contributed to inflation. While inflation continues to keep prices high across the country, the pace at which they rise may be slowing. Calculating your personal inflation rate is a start to developing a plan to meet the demands of rising costs.
The U.S. Bureau of Labor Statistics measures the inflation rate using the Consumer Price Index (CPI) and publishes this data each month. The Bureau of Labor Statistics sorts the data points into eight major groups: food and beverage, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. The CPI inflation calculation is a weighted average of those categories.
The CPI increased 0.3 percent in April on a seasonally adjusted basis after rising 1.2 percent in March. Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the seasonally adjusted all items increase.
How to calculate your personal inflation rate
The typical American family is spending much more on goods and services than they did a year ago. Over the 12-month period ending April 2022, the all items index increased 8.3 percent before seasonal adjustment. To figure out how inflation is affecting you, you need to calculate your own personal inflation rate. Here’s how.
- Take a look at the CPI detailed expenditure category to see what prices are tracked. Working from that list, identify what you’ve spent on food, housing, gas, etc. Check your credit card bills and receipts for a more accurate picture of what you are spending.
- Total your spending for the last month.
- Look back to this same month a year ago and total your spending for that month. Use credit card statements for accurate accounting.
- Subtract your total spending for April 2021 from April 2022.
- Divide that difference by your monthly expenses for April 2021.
- The result is your personal inflation rate.
How does your personal inflation rate compare to the national average?
Depending on how you spend your money, your personal inflation rate may be better or worse than the current CPI number. Where you live can also play a factor in how inflation affects you. For example, real estate prices make it extremely expensive to purchase a home in some areas.
Tips for minimizing the impact of inflation
If inflation is hitting you hard, there are some things you can do to minimize the impact. Here are our suggestions.
- Consolidate high-interest credit card debt with a low-rate balance transfer credit card. Benchmark Federal Credit Union is currently offering a VISA balance transfer credit card that features 0% APR* on purchases and balance transfers for up to 12 months. As an added benefit, there is no annual card fee.
- Re-evaluate your budget to cut unnecessary expenses.
- Postpone big-ticket purchases. Prices will eventually come down, so if your wallet is hurting right now, postponing a big purchase may help. If you do need to make a purchase and are strapped for cash, you may want to move quickly before interest rates rise any further. A low-rate personal loan or fixed-rate home equity loan from Benchmark FCU can provide you with a fixed monthly payment you can budget for.
- Cut grocery costs with coupon apps, buying bulk on sale items, and purchasing generic brands.
- Consider a side job to bring your income more in line with your expenses.
Inflation has increased the cost of living for so many. Hopefully calculating your personal inflation rate will help you combat it. With inflation, like so many other personal financial matters, advance planning and budgeting is key to success.
Read another blog to learn “How to Prepare for the Rising Cost of Credit Card Debt.”
Learn more in our blog “Consolidate Debt to Lower Interest Rates.”
*APR = Annual Percentage Rate. Rate is subject to change and based on an individual’s credit history. 0% Intro Rate is valid for purchases & balances transferred from other institutions within 365 days from card opening. The 0% rate will be in effect for up to 12 months from card opening & after the 12 months, the rate on all unpaid balances will convert to the rate member qualified for at card opening. 0% promotional rate is only valid for new VISA Platinum Cards & subject to expire without prior notice.