How to calculate your personal inflation rate?

A higher personal inflation rate means you will need to tighten your budget to ensure your income could cover your expenses. We in Sri Lanka are well aware of this position?

by Victor Cherubim

We have over the past few days been busy finding out what we know so far about Israel’s strike on Isfahan, Iran; or about whether the “Boats Bill” of Rwanda repatriation, will pass through the scrutiny of the House of Lords for the final time, or even how much of a majority the BJP are assured in the “purple nail identification mark” of the Parliamentary Elections in India, that we have forgotten, about our personal finances?

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Amid the worst Cost of Living crisis in a generation, after COVID-19 or the of the two wars in Ukraine and Gaza, we as consumers or households, have followed each inflation rate rise causing price of foods and services inflation rise with interest?

The rate of inflation in the UK peaked at 11.1% in October 2022, but has come down to 3.1% but not sufficient for the Bank of England’s Monetary Policy Committee to reduce its BOE interest rate. I am not sure of the exact rate it has risen in Sri Lanka. But all I know our Debt stands at US$37.3 billion and our Debt to China lies around $ 4.7 billion at the last count.

How do we calculate our personal rate of inflation and maintain our lifestyle?

In UK we have the ONS (Office of National Statistics) gives a monthly inflation rate for the nation. Our difficulty is how to calculate the personal cost of living increases that do not necessarily feature in the basket that includes things like holiday air fares, or especially care costs? The latter does not feature in each one’s day to day life.

I visited the Digital Accountancy Conference held this week at London Evolution, Battersea

Park. For the first time, seated at earshot in an auditorium, I was able to hear the speakers audibly, but given ear phones while seeing and listening to the speakers as they debated Cash Flow Forecasting. Did the organisers want to monitor, my reactions?

I am aware you can calculate your personal inflation rate by running through your receipts/payments and bank statements, noting down how much you spent in the last month, compared to a similar monthly period in the past year, assuming your spending habits were roughly the same. The difference between the two figures will give you a rough idea of how much the cost of living has gone up or down.

Of course, this is not fool proof. Of course, one has to be cautious to strip out any expensive one-off purchases you made. Similarly, you should account for any month to

month lifestyle changes as well. This will avoid any distortions on your regular spend. Any of such expenses may make them less comparable.

What has visibly gone up in price in the recent past?

What I and many others noticed was that the price of Chocolate has gone up. Easter Eggs had gone up in price compared to last year. Rising Cocoa prices caused increased prices across the entire chocolate industry. Cadbury’s the Chocolate maker had either increased prices or simultaneously embraced reduction in product size, causing a new word in the English Dictionary, “Shrinkflation”.

Besides there is a downward trend in milk drinking, in newer and older generations. Milk once a staple in many diets is now facing a decreased demand due to choice of different plant based alternatives, especially for nutritional and environmental reasons, among young?

Why Personal Inflation rate?

A higher personal inflation rate means you will need to tighten your budget to ensure your income could cover your expenses. We in Sri Lanka are well aware of this position?

While we cannot control inflation, it is important to understand how your expenses change over time. This is called personal financial planning for rainy day scenarios, for any unexpected emergencies, like job losses or health care costs.

Calculating your personal inflation rate, does not have to be an essential chore, it can be included in everyday living to maintain our lifestyle? Small changes, like not using the “touch and go” credit card every time, is one way?