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Old 01-01-2015, 09:44 AM   #21
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Originally Posted by sengsational View Post
Wouldn't it be cool if there were some kind of AI that would track what you, personally, spend your money on, long term, and give you a "personal inflation" value based on then things you have actually spend your money on? Those organizations that calculate the inflation figures make assumptions, like, if the price of beef goes up, you'll buy chicken. But what if you stick with beef? Your personal inflation would be higher than the general calculation. Maybe you burn a lot of gas, maybe very little. As more and more prices are posted online, there could be a "wayback machine" kind of price vacuum that saves prices. Then the user would enter their list of stuff they buy and the proportions spent on each, and it would be able to tell them what their personal inflation rate has been, historically. Then I can see edge cases where some people see huge inflation (a heavy user of things that shot up in price) and others that see no inflation or even deflation (a heavy user of things that get cheaper, like computing devices, electronics, etc).
I think this is getting closer to our own thinking, and one of the reasons that I believe that two phase retirement planning could allow many who are deciding about OMY to rethink what might be overcaution. Some detailed points about this:
Sharing 23 years of Frugal Retirement

Just a few of the changes in spending that reflect the natural expense reduction that comes with advancing age. A very rough comparison between expenses at age 65 and age 80.

Then.... and now = Net Savings
3 homes... down to one home... $11,000
Car mileage/model 16000 to 4000... $4,000
Entertainment/ Travel reduction... $3500
"Stuff" for house... $1500
Food ... !,000

Roughly a $21,000/yr. expense reduction. These numbers, while estimates, are borne out by the annual review we make of our net worth. If and when we move to an apartment in our CCRC, the net savings will increase.

In fact, our original calculations that were based on an end age of 85, now looks to be (easily) another 10 years.
.................................................. .......................................
Many of the "major" dollars that we now spend, are less affected by inflation...
senior tax freezes... food, fewer services... HOA w/strong reserve, no new cars etc.
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Old 01-01-2015, 09:46 AM   #22
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Inflation Data:

For people who like this stuff, it's pretty easy to go to the source: Consumer Price Index (CPI)

The BLS tries to make it easy for people to get data, graph data, and slice and dice as you please.
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Old 01-01-2015, 09:48 AM   #23
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Based on my memory which may be faulty, but the blips in inflation in my lifetime have been strongly correlated with the cost of a barrel of oil. I really cannot remember a time where inflation was above my worry line that oil wasn't involved with. Well, let's keep healthcare costs out of my generalization...


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Wage inflation was a major factor in the 70s.
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Old 01-01-2015, 09:52 AM   #24
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Those organizations that calculate the inflation figures make assumptions, like, if the price of beef goes up, you'll buy chicken.
This has been mentioned here before, but ...

When the BLS calculates the CPI-W (which is used for Social Security benefit increases) and the CPI-U (which is used for FIT indexing, I-Bonds, and TIPS) it does not assume that if the price of beef goes up you will buy chicken.
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Old 01-01-2015, 10:18 AM   #25
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Wage inflation was a major factor in the 70s.

I was very young back then, but if memory serves didn't we have 2 big oil shocks in 70s? I was thinking early to mid (Arab embargo) but seems like their was one in the late 70s too. I assume it is possible they (wage and oil) went hand in hand together. All I know is that I grew up in "that era" and I have been waiting for inflation and high interest rates to return as that was "the normal". Obviously that was wrong thinking clouded by my formative years and 14% CDs growing up.


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Old 01-01-2015, 10:19 AM   #26
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Then the user would enter their list of stuff they buy and the proportions spent on each, and it would be able to tell them what their personal inflation rate has been, historically.

BLS provides a breakdown by fairly detailed categories so one could definitely track their own inflation with a bit of work.


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Old 01-01-2015, 10:55 AM   #27
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BLS provides a breakdown by fairly detailed categories so one could definitely track their own inflation with a bit of work.
Sounds like an app ready to be written!

personalinflationrate.com is available.
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Old 01-01-2015, 01:08 PM   #28
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I retired in 2000 and it appears I have increased (base) spending by about 2.5% each year. My portfolio has more than kept up with inflation. However, I would not want to repeat the 70's/80's time frame.
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Old 01-02-2015, 10:35 AM   #29
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One thing no one seems to have noted in this thread is that the calculations for inflation have changed. I believe the new calculation has less weight for the basics (food, housing and maybe medicine). It makes sense that the typical cost of living really will change over time with our lifestyles (smart phones for example) but it does put a crimp in the analysis. And, I'm pretty sure if you look at the components, most of the country is seeing much higher inflation in food and medicine than the indexes show. The people at the bottom end of the scale are taking it on the chin. Or in the shorts, depending upon your age and regional vernacular.
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Old 01-02-2015, 04:14 PM   #30
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One thing no one seems to have noted in this thread is that the calculations for inflation have changed. I believe the new calculation has less weight for the basics (food, housing and maybe medicine). It makes sense that the typical cost of living really will change over time with our lifestyles (smart phones for example) but it does put a crimp in the analysis. And, I'm pretty sure if you look at the components, most of the country is seeing much higher inflation in food and medicine than the indexes show. The people at the bottom end of the scale are taking it on the chin. Or in the shorts, depending upon your age and regional vernacular.
Food and energy are what I recall as the main deletions from the "new and improved" calculations (for one purpose or another.) If one were suspicious at all, one might think this was to mask actual inflation (which, incidentally DOES depend on food and energy.) But, who's suspicious?

In our case, 90% of our goods and some of our services come from the mainland, so energy to transport quickly goes to the "cost" (on the way up - not so much on the way down.) I suppose one could make a case for the end-user cost already reflecting energy prices. One could, but I'm not sure I would.

What has allowed us to keep our "personal inflation" under control is learning new tricks all the time about substitutions and other saving strategies. Not so much to defeat inflation, but just part of the learning curve when you live in Paradise. We have learned how to shop and share at Costco or to stop at the "cheap" gas stations on our way someplace (whether we need a fill up or not.)

I'm sure it is true that as we age, we tend to spend less (except for medical related items and services as someone mentioned.) Primarily, in our case, less spending hasn't related to actual "consumption" (food, fuel, air travel, vacations, etc.) but it has when it comes to accumulating "stuff." We are beginning to see that stuff owns us instead of the reverse.

I'm starting this year to (hopefully) accurately track our expenses again. Haven't done that for a couple of years, so we will get a good idea what our personal inflation is. Back at ya in a year.
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