Personal rate of inflation

Sterlingtimes · 22 April 2018 at 11:14AM

At age 62, I have enacted some of my pensions otherwise work part-time With my pensions rising by 4% this year, I wondered what the real rate of inflation was for me. I found an interesting personal inflation calculator here: https://www.rathbones.com/personal-inflation-calculator

Interestingly, it gave my personal rate of inflation as 0.3%. I must be avoiding generally the types of expenditure that give rise to 4% plus inflation. Insurance seems to be quite a nasty area for high levels of inflation.

I wonder whether other people taking pensions find their personal rate of inflation is lower than the inflation applied to pensions (RPI, CPI etc.).

kidmugsy · 22 April 2018 at 11:51AM

Insurance: we need motor insurance, and insurance for the fabric of the house. We've wondered about carrying our own risk instead of buying contents insurance. Currently the Nationwide supplies our travel insurance "free" by virtue of having a Flexaccount. How long that perk will last Lord knows.

We are old enough that we have no life insurance. If we were younger now we should, I think, consider income protection insurance: the protection many people used to get as part of a DB pension is now rare outside government employment.

Sterlingtimes · 22 April 2018 at 2:30PM

I was one of those people who bought PPI, which was not sold to me under duress, and which I subsequently claimed against when I was made redundant. I also bought permanent health insurance and freestanding redundancy insurance, which I did not claim against but which gave me confidence that I had adequate security in the event of a bad occurrence. Fortunately, that disappears retirement.

Insurance being linked to risk does seem to outpace RPI.

Xbigman · 22 April 2018 at 7:11PM

As an individual the official RPI figures are a great big semi meaningless average that is only relevant because it directly effects my income. Its effect on my outgoings is almost non existent.
For several years I have tried to track my personal rate of inflation. I keep getting situations where I am not sure how to treat various things. IE
I had to change my diet for health reasons. My food bill went up by £3 per week, but is that inflation or a spending choice I've made?
I ditched live TV and thus the TV licence, so a bill disappeared. Is that negative inflation or do I adjust the drop in outgoings to factor the TV licence out of the inflation figure?
I bought a new freezer so my electric bill dropped. Is that negative inflation on the electric bill or do i factor in depreciation on the new freezer to the inflation figure?
In 2017 I looked at my purchase history on Amazon for 2007. I was spending £9.99 on new DVDs as they came out. Today most DVDs are the same price new as they were 10 years ago. Apart from the new Star Wars film I rarely buy anything as its released, instead I wait 3 to 6 months for the price to drop or for 'like new' second hand ones to become available. Is that negative inflation or am I just wiser? Do I adjust inflation up because 2nd hand DVDs are less desirable or do I not adjust anything because they are just as enjoyable?

I'm single and live cheaply (don't drink, don't smoke and I ride a pushbike) so my financial affairs are simple compared to some but I cannot put a definitive figure on my personal inflation. I doubt anyone can. I've decided that rather than calculating inflation I will add up the pounds going out of my bank account each year and compare that with the pounds going in. Thats all that really matters.

Darren

drphila · 22 April 2018 at 7:27PM

Thanks for that little tool, though I couldn't find any reference to the Community Charge? That is one of major pieces of expenditure

Mine came out as 4.2%, but in practice and with plenty of time on my hands, I am currently able to get below 0% by various moneysaving initiatives.

OldMusicGuy · 22 April 2018 at 7:55PM

Mine came out at 4.3% which is not right for us. For example, most of the stuff in the food category used to calculate RPI/CPI we do not consume as we eat fresh and home produced food. So if the price of doughnuts and ready meals goes up, that's irrelevant to us.

I don't believe in inflation. Like drphila said, we closely monitor budgets to ensure we don't get hit by general rising prices. We also monitor things like water usage to ensure we don't waste water (we recently reduced bathing frequency, hair washing frequency and toilet flushing frequency to reduce our bill). The only thing we can't control is community charge, but we will be reducing that by downsizing.

IMO inflation is only an issue if it reaches silly levels like in the 70s, or if you just blindly spend your money like a dumb consumer (which I hope most on MSE don't do!).

greenglide · 22 April 2018 at 7:55PM

Community Charge?

That is a very old name?

Has been Council Tax for almost 25 years!

kidmugsy · 22 April 2018 at 9:21PM

greenglide wrote: »

That is a very old name?

Has been Council Tax for almost 25 years!

I laughed too. Codgers, eh?

Sterlingtimes · 23 April 2018 at 10:21AM

I think that economising on the purchase of goods and services in retirement is quite different from inflation. The compound effect of inflation, even at the current low rate, can be substantial and I would not dismiss inflation.

Sterlingtimes · 23 April 2018 at 10:28AM

greenglide wrote: »

That is a very old name?

Has been Council Tax for almost 25 years!

I was single with a four bedroom property at the time of Community Charge. It was wonderful for me suddenly I made a massive saving on my rates.

In a way, I look back with fondness at high inflation. By and large, salaries were indexed to inflation and mortgages became smaller and smaller as the years passed. Of course, mortgages were far more expensive but the balance looked good. Today, pensions are often generously inflation linked but salaries are not.

Terron · 23 April 2018 at 12:34PM

My personally inflation rate came out at 4.2%

It seemed wierd to me that clothing and shoes was a monthly cost rather than yearly. This month I spent £50 on each but they were my first purchase of either this year.

Personal rate of inflation

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