Author Topic: Do you track inflation to compare YoY change in worth/spending power?  (Read 950 times)

Ron Scott

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I retired in 2017 and started a simple spreadsheet to monitor change in my new worth from my retirement month—accounting for inflation. I update this annually. I monitor year-over-year changes as well as the cumulative change from NW in ‘17.

Illuminating. If inflation were an expense it would be the largest BY FAR. But until last year portfolio gains far surpassed it.

In any event, a question: If you do this do you include real estate as part of the amount to inflate?

I include RE but i’m thinking I should exclude it. (I do make changes to the value of my real estate each year for NW purposes, to track the Zillow estimate less selling transaction fees.)

Morning Glory

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I see tracking my spending as a way of also tracking inflation in the parts of the economy that are relevant to me. I can then compare my spending to my net worth to see if I'm still at a safe withdrawal rate or not.

BlueMR2

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I see tracking my spending as a way of also tracking inflation in the parts of the economy that are relevant to me. I can then compare my spending to my net worth to see if I'm still at a safe withdrawal rate or not.

This, as the official inflation rate may or may not be anything like what I'm actually experiencing.

FIRE 20/20

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I don't.  I've been FIREd for a little over 3 years now, and the combination of good market returns plus lower spending than planned has resulted in a very low withdrawal rate.  We aimed for a 3.7%-4% withdrawal rate, but since we're living how we want to live far below that I don't see any need to spend any time thinking about inflation or returns.  For us it would be a little bit of work without any benefit.  Each year in December I do a brief "report", but since the overall withdrawal rate is low it's not worth diving any deeper. 

bmjohnson35

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I do a crude single-page version of this by tracking and forecasting 12 budget categories, but I don't really accurately measure content of the buckets.  I can easily track some major expenses YOY (auto, health & home insurance and property taxes). I can also track water, electric and cable/internet costs.  I haven't tracked food or fuel costs closely.  I suspect these would be the most telling in regards to inflation.

lifeisshort123

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I used to not do that, but over the past year I have begun to.  I am not FIREd yet, so I am trying to boost my earning power - and one of the best ways to do that is, as you all know - not to spend.  A penny saved is a penny that is earning!

Bateaux

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Work a little longer and save a little more.  You'll beat inflation.

ixtap

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I do not track inflation. I do track my own spending. This year, it has come down despite inflation due to some lifestyle changes that have been in the works for a few years.

secondcor521

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I've calculated my personal rate of inflation over about 10 years using Quicken spending data.  It was about 0.5% annually.

I also calculated my 2022 vs 2021 YTD spending.  I'm at about 12% deflation.  But that's because of some technicalities in terms of how I track things and where my kids happen to be at this point in their lives.

What I do is take last six months spending divided by FIRE stash to determine my WR%.  I'm typically under 1%, so my focus for a while now has been trying to spend more in a wise and useful way.

2sk22

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Re: Do you track inflation to compare YoY change in worth/spending power?
« Reply #9 on: August 01, 2022, 05:54:39 AM »
I do track spending in Quicken but the size of my household tends to fluctuate quite a lot so its hard for me to do direct year-to-year comparisons.

On a subjective level, we have not felt the impact of inflation very much: We don't drive a lot, we don't eat out very much, we don't rent and we are mostly vegetarians. Our local movie theater still offers $6 tickets.

I did feel increased prices a bit last week when I had lunch with a group of college friends in NY City - we typically meet a few times a year. Parking was way more expensive at the usual garage where I park and lunch was about $15 more than in the past. But it could also be because NY is jammed with tourists nowadays. I can't blame businesses for trying to make a few bucks to make up for the past couple of years when the city felt like a ghost town.

Zikoris

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Re: Do you track inflation to compare YoY change in worth/spending power?
« Reply #10 on: August 01, 2022, 02:35:54 PM »
I don't track to the level of detail that I could use it to calculate inflation precisely, but I do track total spending and category spending overall, which gives me an idea of spending year over year. My totals have been fairly consistent over time, though I do make changes here and there to offset if prices on one thing increase.