As one half of a married couple, my inflation rate (or more accurately “household inflation rate”, since my wife and I share costs equally). Whatever its name may be, my personal inflation rate stands second only to savings rate as an important personal finance metric, surpassing safe withdrawal rate, crossover point net worth (or my favorite “usable net worth” invented by me), safe withdrawal rate, safe withdrawal rate safe withdrawal rate safe withdrawal rate safe withdrawal rate safe withdrawal rate safe withdrawal rate crossover point net worth (and even net worth/usable net worth”), as one of my primary personal finance metrics.
What is Personal Inflation Rate? Most of us are familiar with price inflation; let’s begin here. When consumer prices increase over time, that is inflation; when consumer prices decrease over time – deflation – prices don’t always have to rise and can also decline over time.
The Consumer Price Index, or CPI, serves as an economic health measurement to monitor inflation/deflation trends. CPI measures all goods and services excluding energy-dependent commodities such as food due to their highly unpredictable price fluctuations.
CPI can be calculated by taking the current price of goods and services and dividing it by their previous prices (often current month, quarter or year divided by previous one).
Recent years, the Federal Reserve has endeavored to achieve an annual CPI inflation rate of 2% through various means such as changing the Federal Funds rate and other means.
Things do not always run smoothly; for instance, when there are energy commodity shortages and demand exceeds supply, demand can quickly push the price of energy up quickly, increasing overall inflation (even if energy wasn’t included in the index). Conversely, weak demand and over-supply can lead to deflation, an indicator that could signal troubled economic conditions.
Personal inflation rate refers to applying the Consumer Price Index concept directly to personal expenditures like goods and services (such as energy and food) purchased.
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