A personal Rate of Inflation ...

I mentioned this subject in a post a few years back, but inspired (!) by the recent decision by NS&I to tie future index-linked certificate renewal returns to CPI instead of RPI, CPI being typically around 1% lower than RPI, I decided to have a go at calculating a personal inflation rate to see how it compares with the UK government's own 'official' figures.  

At the time of writing, CPI is running at 2.4% per annum and RPI at 3.3%.

My results are tabulated below with a few following notes on the methodology and values used etc.  I've hidden the columns with the actual sums spent, and am just displaying the percentage changes from 2017 to 2018.

including holidays & travel

a) our long winter break was used as a proxy for all the 'Holidays & Travel' category, and its costs were multiplied by 2 to represent the other holidays we also take throughout the year.   Because our 2018 early break was actually paid for in late 2017, I calculated the costs which would be incurred today of taking an identical trip in early 2019, using exactly the same flights, accommodation & duration etc.


b) 'Food & Drink' is difficult to calculate accurately because quantities and specific foodstuffs etc vary slightly each time, but I've taken the total costs of all our weekly shops in the same period of both years.  This is considered reasonable, because a lot of what we eat and drink uses the same ingredients and includes basic commodities such as wine, beer, coffee, tea, milk, bread, eggs, fish, meat & poultry, fruit & vegetables, cereals etc, and we still shop at the same places as a year ago.

c) 'Car Fuel' is based on the current pricing versus that of a year ago using September 2017 & 2018 figures from the AA, and on the basis of 8,000 miles per year at 50 mpg.

d) 'Heating Oil' figures represent our average 'per litre' delivered cost and the same consumption each year.

e) 'Broadband' costs should be going down, not up.  I'll use this exercise as a reminder to negotiate a more favourable deal with the provider ...

Other than the 'Holidays & Travel' and 'Restaurants & Bars' categories, I've excluded most of the discretionary spending because this tends to be a series of one-offs which are not necessarily repeated from year to year.


So, including the Holidays & Travel, which at present is by far the largest single category of our spending and in which costs have actually decreased over the year, our annual inflation rate is running at around 1.1%, despite huge increases in the cost of energy in the forms of Electricity, Heating Oil and Car Fuel.

However, taking the travel out of the mix altogether produces very different results :-

excluding Holidays & Travel

In this case, the annual rate of inflation rises to 6.8%, a significant increase in living costs.  The only line item that was actually cheaper in 2018 than 2017 was the cost of insuring our cars.

An interesting exercise ...