What is Your Personal Inflation Rate?

I have a hard time believing the government statitistic that claims the inflation rate is just 2.81%. It’s an average that may have nothing to do with your actual increase in costs.

That’s why I think we all need to calculate our own personal inflation rate. It’s important to figure out how costs have risen in your own day to day life compared to last year.

Here’s how I take a rough look at mine. Maybe it will help you with planning and understanding why it seems that inflation is much higher than the experts report.

1. Food. I try to use local markets and farms when I can but my food inflation is well over 10%. It will rise to some 20% when I can no longer go to farmers markets when the snow flies and they close. We did just freeze 60 pints of local raspberries and blueberries are next. I harvested my 100 garlic bulbs and grabbed some honey from the bees. Whatever you can do to move to be more self-sufficient with food will help.

2. Transportation. I drive a used VW Jetta, purchased for under $20,000 some 3 years ago. I’d never spend more than $20,000 on a car. The cost of gas here has gone up more than 20% but my VW helps with great mileage.

3. Taxes. Those are up significantly. If you own a home, you will note that soon if not already your property taxes have gone up 100% or more because of increased values. That happened to us in Nova Scotia.

4. Housing. If you rent and have to move you will notice the increase in costs from over 20%. It’s very difficult to find a good home to rent today without paying significantly more in my community. If you own a home and have a mortgage, soon your interest costs will soar by over 100%. If you own a home and don’t have a mortgage, you are paying more for all other costs to keep your house in good shape. All trades, and materials have increased more than 20% year over year here. House insurance has also increased significantly. But if you own a home you are very fortunate today.

5. Health Care. Rarely discussed here in Canada because it’s supposed to be free, the truth is you pay for many services not covered by the government plan. This one is hard to figure for me because I’ve been lucky so far and not needed a lot of extra services. Dental costs seem to have stabilized here so I can’t calculate a number for this one.

6. Restaurants. If you go out to eat as a treat on occassion, you’re likely paying a lot more. Part of that is due to increased costs, the other is the feeling of the need to support the workers who prepare and serve the food. I’ve noticed that tipping on our part has increased by at least 15% as has the cost of most meals. I’m grateful that a restaurant is actually open these days, and so I feel compelled to support them more than ever.

7. Utilities. Heat and hydro costs have risen well over 10%. It’s going to get much worse. I am somewhat sheltered with the installation of solar panels and a heat pump here at the house. The government has also provided some incentives to convert to a heat pump. Overall while the cost of the hydro and gas has gone up, the new technologies and solar have resulted in no real inflation in this category for us.

There are a number of other categories that could impact your level of personal inflation. Take a look and be realistic on how you will cope with these increasing prices. When the government tells us it’s just 2.8% put it in perspective. For most Canadians it’s just not true. For Mary and I our inflation rate is well over 12%. What is your number?