- Everyone’s panicking about the rising cost of goods and services because of inflation.
- A financial planner recommended calculating how much inflation is actually costing me.
- My personal inflation rate is 14%, even though I spent way less on groceries this year.
My Instagram and TikTok feeds are filled with memes about inflation. Living in Los Angeles, my friends and I joke about the rising cost of gas — now $7 a gallon or more in some areas — to cope with the stress of making ends meet.
Some of our collective panic is warranted. Inflation, which is defined as the rising cost of goods over time, is the highest it’s been in 41 years. The average annual inflation rate in the US is about 2%, however, due to supply shortages during the pandemic, the inflation rate from May 2021 to May 2022 is 8.6%.
How I calculated my personal inflation rate
I spoke with financial planner Nicole Morong at Peterkin Financial about my worries about inflation. She told me, “The way I approach inflation with my clients is, first, we have a conversation about what the actual inflation rate is for things like mortgage rates, credit cards, gas, and groceries. And then we talk about what their personal inflation rate is, which is based on what you’re personally experiencing.”
To calculate inflation overall, economists compare the average cost of goods and services year-to-year, for example, May 2021 compared to May 2022. Similarly, Morong told me I can calculate my personal inflation rate by comparing my spending in different categories year-to-year using this equation:
My personal inflation rate from May 2021 to May 2022 is 14%
Before I get into analyzing my personal inflation rate, the practice of comparing my year-to-year growth felt so satisfying. In a world where we’re trained to compare ourselves to others constantly on social media, it was healing to only compare me to me.
My monthly income grew 46% from 2021 to 2022, and my rent increased when I moved out of an apartment with roommates to my own one-bedroom. Sometimes, I still feel guilty for how much rent I pay compared to people who live in less expensive cities, but it felt good to know that the 45% increase in the rent I pay is proportionate to how my income has grown.
I spent less on groceries and takeout, but I spent more on gas
Morong says getting clarity about your personal inflation rate can help you understand how much you can counteract overall inflation with small, manageable lifestyle changes over time. I was surprised to learn that I was already taking those measures with my grocery expenses down 40% and my takeout expenses down 71%.
Morong says, “Even if groceries have gone up in value, maybe you’ve subconsciously made different habits, and your personal inflation rate is flat when it comes to groceries.” She adds that most of her clients cut certain categories by making small changes, like meatless Monday dinners or going out less to offset inflation.
My gas costs rose 50%, but May was a lean month. Thus June, when I typically go out more for Pride month celebrations, I spent $235.67 on gas compared to last year’s $72.12 — a whopping 227% inflation rate. Part of the reason my gas costs rose is that I moved to a less central neighborhood where rent is cheaper, but a bigger part of it is the skyrocketing cost of fuel.
Understanding my personal inflation rate gave me a much-needed reality check
Seeing that number — 227% increase for gas from June 2021 to June 2022 — gave me a much-needed reality check. Hanging out with my friends and community is very important to me. To make room for the cost of gas in my budget, I’m cutting back in other areas little by little.
While I’m taking responsibility for what I can…