What’s Your REAL Inflation Rate?
There is a lot of worrying concerning inflation out there. There is very little you can do about it. One thing you can do however, is track it. Forget about the CPI, core inflation and all the other numbers from the Federal Reserve. The only number that really matters is your own personal inflation rate. Your real rate of inflation.
Track Your Spending
The only way you can know for sure how much your spending and expenses are growing is to monitor them. Hopefully you already have a budget. If you don’t, sit down and make one today. Go over your budget at least once every month and see how you did. It only takes an hour a month, thats twelve hours a year. You can fit it in even the busiest of schedules. For something so important, it is worth it.
After a year of diligent tracking you will be able to see exactly how much more you are spending year over year. This is your real inflation rate and is unique to your own situation.
Assuming my 2008 budget holds, my expenses and spending will grow 3.41% from 2007 to 2008. All of the numbers are not in yet, but I’m hopeful that I can bring that number down by spending less than planned over the course of the year. So far, all three months of the year have been under my budget.
Control Your Consumption
We live in a commercialized world and there are many temptations out there to create our own inflation. Do I really need an iPhone with a pricer wireless plan than I have now? No. Not now.
I’m not saying that I wouldn’t ever buy an iPhone, but right now, keeping my expenses in check is more important. I won’t sabotage my goals in order to have the internet in my pocket (although it would be really cool).