savings V inflation

jimjames

Forum_User wrote: »

You're going to weird shops then. Most basic commodities have not gone up in most normal shops for years. At least not by the inflation rates, not even close.

Normal stuff doesn't go up by inflation. Ergo, inflation is not real. Its just a myth really.

Some shops (the ones to avoid!) may put their prices up because they know people will buy into that myth. But normal shops/businesses don't.

Just avoid your weird places/things, you will realise the truth.

I buy from Tesco, not sure if that counts as a weird shop when nearly 30% of the population buy there.

Did shopping yesterday having not done a full shop for a while and prices are definitely higher.

I also found a piece of newspaper in a file at home from when I was a kid. If you can still find 500ml mixer drinks for 10p or turkey at 49p per lb then I'd like to know the address of your shop so I can stock up. If not then thats the reality of inflation.

Loughton_Monkey

The last thing I would say is that inflation is 'good'. I abhor it the same as the next person. Having lived through 27% inflation [but was thankfully working and got equivalent pay rises] and now retired, I am very nervous of 'mega' inflation. To me, anything less than 5% is maneagable.

When I retired, my financial projections assumed 3% inflation. I am pleased to say that this is exactly what I have suffered. That's because I doggedly stick to spending no more than 3% above last year whatever happens. It's not difficult for most of us. My Water Bill coming in at 6% is far from helpful, but I will ensure that other things come in at 0% (or less).

My budget for any one year is calculated to the 1p and I can guarantee I will not exceed it. I have the usual 'grid' by month and by type of expense. If January adds up to, say, £5,830.45 and I actually spend £6,000, then I will 'rob' another month of precisely £169.55. If I actually spend £5,600, then I will put precisely £230.45 into 'contingency' - available (if necessary) for use in future months.

I think only an incompetent ignoramus could mess this type of system up. Provided, that is, the budget is realistic, and contains a small level of contingency (typically unused and carried forward to next year) for 'emergencies'.

Forum_User_2

Well, many normal shops, most in fact, don't raise their prices! In fact, they normally go down!

Also, you don't need petrol.

Linton

Ilya_Ilyich wrote: »

You know how the RPI/CPI are calculated, right? They specifically measure price increases for a selection of widely-purchased goods; the government doesn't just pluck a number out of the air and say "the inflation level is now X".

I believe both over-estimate real increases in total costs. One reason is that if something optional, call it X, becomes very expensive it increases the inflation index but at some time in the future the standard basket is adjusted to reduce the amount bought. However people stop buying X immediately.

The net effect is that the indices are latched upwards compared to people's actual expenditure.

ed123_2

....the inflation data is backward looking ie the past year while the interest on savings accounts is a forward looking figure...also the inflation numbers are made up of some components most of us buy only every few years eg how many flat screen tv's do we buy each month....

jimjames

Forum_User wrote: »

Well, many normal shops, most in fact, don't raise their prices! In fact, they normally go down!

Also, you don't need petrol.

So inflation only affects things youdon't need?

shaun_from_Africa

Just for interest, this document shows what is contained in the "basket" used to measure inflation.
http://www.statistics.gov.uk/articles/nojournal/cpi-and-rpi-the-2011-basket-of-goods-and-services.pdf

And there is an awful lot of stuff on there that most people buy on a regular basis, so if as suggested, they are not going up, why is inflation going up?

Here's just aselection from the list. Not exactly exotic, rarely purchased foodstuffs.

Bread and Cereals
Large white loaves - sliced and unsliced
Large wholemeal loaf
Bread rolls
Garlic bread
Flour
Rice Pasta
Breakfast cereals
Various selected biscuits
Corn based snacks
Doughnuts

Sponge cakes
Crackers

Beef
Rump steak
Braising steak
Mince Topside
Frozen burgers
Lamb
Loin chops Shoulder
Leg
Pork

Loin chops
Back bacon

Vegetables
Loose and pre-packed potatoes – old, new and baking varieties
Crisps – single and multi-packs
Peppers
Frozen chips
Fresh tomatoes
Cabbage
Cauliflower
Carrots
Mushrooms
Onions
Lettuce

Cucumbers
Canned baked beans

Coffee, Tea and Cocoa
Tea bags
Ground coffee
Instant coffee
01.2.2 Mineral Waters,
Soft Drinks and Juices
Various pure fruit juices
Squashes

Mineral water
Various fizzy drinks

Stompa

shaun_from_Africa wrote: »

Here's just aselection from the list. Not exactly exotic, rarely purchased foodstuffs.

True enough, but as the article points out food & non-alcoholic beverages only account for 11.8% of the index.

edinburgher

I'm not afraid of inflation. I have purchased a million first class stamps at old prices and will be living off the resale profits for some time

I kid, but it would be funny to see some of the sorts of crazy 'OMG inflation!!' type posts that are endemic on American personal finance sites.

shaun_from_Africa

True enough, but as the article points out food & non-alcoholic beverages only account for 11.8% of the index.

Fair enough Stompa, but I only gave the food examples as this is something that just about every household in the UK will be buying on a weekly or daily basis.

Many of the other items included in the "basket" are still regular purchases by most people, and whilst not on a weekly basis, an awful lot of them will still be bought over the course of a year. Things such as clothing, bedding, gardening and household appliances household maintenance materials, eating out bills etc, then there are the real killers, which I think that just about everyone has to pay such as gas, electricity, petrol and water bills and if they don't pay for petrol, they probably still pay for transport services such as busses, taxi's and trains which are also included.

Whilst there are some items on the list which are rare purchases, I don't think that there are too many of these, and overall it strikes me as a fairly well balanced selection of goods and services.