With prices rising on everything from gas to groceries, and even homes, it’s good to know where your budget stands as compared to last year. Figuring your personal inflation rate is a good way to do this. The government tracks pricing using the Consumer Price Index or CPI. This is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI is the most widely used measure of inflation.
Figuring your personal inflation rate
If the inflation rate is 2 percent at the national level, that doesn’t necessarily mean that your individual household expenditures have gone up 2 percent. The CPI looks at price changes for the average consumer in an urban area. It only examines the prices of a select group of goods and services. To get a better idea of the impact of inflation on you, you’ll want to calculate your personal inflation rate.
To calculate, look at your expenditures from the first quarter of 2021 and subtract that number from your total expenditures for the first quarter of 2022. Divide that difference by your 1st quarter 2021 expenditures. The resulting answer will be your personal inflation rate. When comparing, look for things like housing, food, etc. (your actual living expenses). If you made a large purchase that you wouldn’t normally make, don’t figure that into the equation.
What expenses are affected by inflation
Fixed-rate mortgage payments and other fixed-rate debt payments may not be affected by inflation. Because inflation is causing the Feds to raise rates, it might be smart to refinance existing variable-rate debt now before rates go up any further. Transferring high-interest credit card balances to a 0% balance transfer credit card might be one way to save. Choice One Community Credit Union is currently offering 0% APR* on balance transfer for six months with no balance transfer or annual card fees. Fixed-rate home equity loans are another option for consolidating fluctuating debt.
The areas you may be taking the biggest hit with inflation, include utilities, fuel, groceries, cable/internet, mobile phone, insurance, entertainment, and travel to name a few. To help you reduce expenses and battle inflation, look for ways to save. Here are a few tips.
5 ways to reduce the bite of inflation
- Reduce the interest rates on high-rate debt and refinance adjustable-rate debt to a low, fixed-rate. As mentioned above, now is the time to lock in a lower rate before rates go any higher.
- Shop around for better auto and home insurance rates.
- Perform a DIY energy audit to find spots where you may be losing energy due to leaks, and other problems. Tap for things to look for during a DIY home energy assessment from Energy Saver.
- Cut your grocery bill. Grocery prices have seen a big increase, and everyone needs groceries. To save on your monthly grocery expenses, buy generic and in bulk when possible, add more meatless meals to your family’s dinner rotation, clip coupons and use money-saving apps, scan grocery store flyers for weekly sales, and incorporate more low-cost items into your menu.
- Consider a side gig to increase your income and help get your budget balanced.
Cutting expenses and consolidating high-interest debt are two ways to counteract inflation right now. Read more helpful tips on our blogs “3 Ways to Protect Yourself from Rising Credit Card Interest Rates.” and “6 Tips to Manage Rising Costs”.
*0% VISA Balance Transfer Rate is valid for 6 billing cycles from the date of transfer. Rate returns to the current rate at that time. Choice One’s current Platinum Visa Credit Card Rate is 8.90% APR and Classic Visa Card is 13.50% APR with No Balance Transfer or Annual Fee. Balance Transfer offer is good on any new or existing Choice One Platinum or Classic Credit Card. 0% balance transfer rate is for balances transferred from another institution only. Transfers may not exceed the credit line a member is approved for.