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Old 02-20-2012, 02:41 PM   #41
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Originally Posted by walkinwood View Post
As Al points out, there is a difference between personal inflation & personal spending.
Well personal spending is that only way I can measure it. And it's the only thing I can really use to predict my personal spending future. Otherwise "inflation" has no meaning to me.
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Old 02-20-2012, 03:55 PM   #42
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Well personal spending is that only way I can measure it. And it's the only thing I can really use to predict my personal spending future. Otherwise "inflation" has no meaning to me.
My "problem" has been that every year is different.

Now that we're empty-nesters and we've finished our home improvement ambitions, maybe next year will be more like this year. Recursively.
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Old 02-20-2012, 04:06 PM   #43
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My "problem" has been that every year is different.

Now that we're empty-nesters and we've finished our home improvement ambitions, maybe next year will be more like this year. Recursively.
Sure, and for that reason I leave out the major one-off big ticket items like furnishing a new house or doing some major home upgrade. These are also things that one does not "have" to do year in and year out. We do them when we feel that we have the money, otherwise we wait until we do.

Of course I STILL sometimes had +/- 20+% fluctuations year-over-year so seeing the average over many years was helpful. As was comparing 2000 spending to 2011.
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Old 02-20-2012, 06:03 PM   #44
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Sure, and for that reason I leave out the major one-off big ticket items like furnishing a new house or doing some major home upgrade. These are also things that one does not "have" to do year in and year out. We do them when we feel that we have the money, otherwise we wait until we do.

Of course I STILL sometimes had +/- 20+% fluctuations year-over-year so seeing the average over many years was helpful. As was comparing 2000 spending to 2011.
I have major, infrequent items budgeted separately too, seems like a good approach. For me, it's about 20% of total spending on average, though highly variable from year to year - years we buy new cars with cash are peaks for example.
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Old 02-20-2012, 06:06 PM   #45
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Sure, and for that reason I leave out the major one-off big ticket items like furnishing a new house or doing some major home upgrade. These are also things that one does not "have" to do year in and year out. We do them when we feel that we have the money, otherwise we wait until we do.
We have major, infrequent items (cars, large home repairs, furniture/appliance/electronic replacement, etc.) budgeted separately too, seems like a good approach. For us, it's about 20% of total spending on average, though highly variable from year to year - years we buy new cars with cash are peaks for example.
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Old 02-20-2012, 06:12 PM   #46
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I have spent so much the last 7 years that I cannot see how it could be higher in the future (knock on wood).

Soon, I should be sliding down on the Bernicke's decline slope, which by the way starts at the age of 56. Wow, what a coincidence!
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Old 02-20-2012, 06:13 PM   #47
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I just looked at my annual living expenses from 2000 through 2011 - the 12 years I have been retired. I have always felt that my basic living expenses were more or less flat, or at least had only risen slightly and most of that in recent years.

From Dec 2000 to Dec 2012, cumulative inflation was 29.7% according to InflationData.com's Cumulative Inflation Calculator

However, my basic annual living expenses only went up 2.3% over that time period. Yes - you read that right.

My basic living expenses include normal day-to-day expenses that occur annually which includes discretionary expenses such as travel, eating out, smaller toys and appliances.

It does NOT include expenses I consider "super discretionary" such as charity, gifting $$ to family, or large item one-off expenses such as buying a motorhome or the occasional computer or high-end camera body. Decisions to buy such things are made on a case-by-case basis when and if I feel I can afford them.

My year over year % change from 2000 in basic living expenses went like this:

Year YOY Since 2000
2001 -4.8% -4.8%
2002 +8.5% +3.36%
2003 -19.0% -16.3%
2004 +16.6% -2.4%
2005 -21.6% -23.5%
2006 -7.9% -29.5%
2007 +15.9% -18.3%
2008 +2.6% -16.2%
2009 -13.1% -27.1%
2010 +9.0% -20.6%
2011 +28.8% 2.3%

Some things definitely went up over that time period like health insurance which more than doubled. So obviously other expenses went down over the same time period.

We spent quite a bit more money on travel tours during the first three years. Then switched to much more RVing type travel over the next several years which was lower overall, however spending on fuel, groceries and eating out and maintenance increased during that same time period. Finally, in 2010 we did less RVing, but we moved into a new home with higher baseline expenses.

Just FYI - thought folks might find my "personal inflation" story interesting.

Audrey
That's a very interesting way to look at personal inflation rate. Based on your example, I went back and eliminated the "exceptional" items from my annual expenditure records and with some minor variations, going back to 1992 (that's when I started tracking things with Quicken) We spend about $60K a year. What's absolutely amazing to me is that our living circumstances changed so much over that time- From living in the San Francisco Bay area in the 90's with two teenagers to retirement in rural Southwest Oregon with our kids (goat kids that is) and we are still spending about the same - weird! I guess $60 K is my magic number.
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Old 02-20-2012, 06:17 PM   #48
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If you can find the old paper by Ty Bernicke in Wisconsin, you'll see that his experience with retirement planning and the government statistics show that independent of assets, retirees spending beginning to drop off some time after about age 70. The report was discussed a lot on this board a few years ago. I think he published the report back in about 2005 or so for some financial planning organization.

YMMV of course.....
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Old 02-20-2012, 06:20 PM   #49
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I have not read Bernicke's report, but FIRECalc says "Note: If you indicate you are 56 or older, then the spending will be reduced immediately."
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Old 02-20-2012, 06:24 PM   #50
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if I exclude large , irregular items like new houses (bought 2 since retirement), new cars, art, new kitchen, really expensive trips, daughter's wedding(soon I think), the rest is remarkably consistant. My challenge is to reduce the frequency of "unusual items"
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Old 02-20-2012, 06:26 PM   #51
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Yes. But on the other hand, I strongly suspect the amount spent on "unusual items" is highly correlated to one's portfolio growth in a particular year. Or so I hope!
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Old 02-20-2012, 06:50 PM   #52
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Most studies I have seen conclude that spending levels off or drops as one ages, but I am not convinced that these studies properly accounted for limitations in the means of the retirees. If you spend down your assets, then your spending will have to reduce to the new limitations of your means.
From the people I have known I am convinced that spending usually does decrease with age independent of change in assets. My mother is in her late 80s and I have other relatives of similar age (including a 95 year old uncle who still drives and manages fine on his own). There is no question that in the last 10 years she has slowed down a lot and doesn't spend as much because she doesn't like to go out. Even when we visit her and we are paying, she usually doesn't want to go out to eat or other places as she feels it is tiring. She still drives but mostly keeps herself to going to the grocery store or other nearby stores or going to the doctor.

Yes, she spends some more money for people to help with various things but that is very much outweighed by the fact that she doesn't like to go out much, has low expenses overall (house was paid for over 40 years years ago), and she doesn't require any extraordinary expenses (ie she has someone she pays to mow the yard but she doesn't need a home health aide).

I find this is also true of the others that I know of similar age.

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I often wonder if many posters, myself included, are just worrywarts. Look around, I see so many people living on much less. They would not understand the problems that we are so concerned with.
Well, yes. Maybe it is just my middle class upbringing but most of my relatives retired with far less assets than what appears to be average on this forum (as based upon the polls I've seen of portfolio sizes) and they have done fine. In fact, many of them have spent little or nothing from their portfolios living on SS or SS plus a small pension.
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Old 02-20-2012, 06:59 PM   #53
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Originally Posted by audreyh1 View Post
I just looked at my annual living expenses from 2000 through 2011 - the 12 years I have been retired. I have always felt that my basic living expenses were more or less flat, or at least had only risen slightly and most of that in recent years.

From Dec 2000 to Dec 2012, cumulative inflation was 29.7% according to InflationData.com's Cumulative Inflation Calculator

However, my basic annual living expenses only went up 2.3% over that time period. Yes - you read that right.

My basic living expenses include normal day-to-day expenses that occur annually which includes discretionary expenses such as travel, eating out, smaller toys and appliances.

It does NOT include expenses I consider "super discretionary" such as charity, gifting $$ to family, or large item one-off expenses such as buying a motorhome or the occasional computer or high-end camera body. Decisions to buy such things are made on a case-by-case basis when and if I feel I can afford them.

My year over year % change from 2000 in basic living expenses went like this:

Year YOY Since 2000
2001 -4.8% -4.8%
2002 +8.5% +3.36%
2003 -19.0% -16.3%
2004 +16.6% -2.4%
2005 -21.6% -23.5%
2006 -7.9% -29.5%
2007 +15.9% -18.3%
2008 +2.6% -16.2%
2009 -13.1% -27.1%
2010 +9.0% -20.6%
2011 +28.8% 2.3%

Some things definitely went up over that time period like health insurance which more than doubled. So obviously other expenses went down over the same time period.

We spent quite a bit more money on travel tours during the first three years. Then switched to much more RVing type travel over the next several years which was lower overall, however spending on fuel, groceries and eating out and maintenance increased during that same time period. Finally, in 2010 we did less RVing, but we moved into a new home with higher baseline expenses.

Just FYI - thought folks might find my "personal inflation" story interesting.

Audrey
This is good. We are starting year 5 and DW is flummixed (is this a word?)that there is a big standard deviation from year to year. Good to see that it happens to others, too.
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Old 02-21-2012, 11:31 AM   #54
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Yes. But on the other hand, I strongly suspect the amount spent on "unusual items" is highly correlated to one's portfolio growth in a particular year. Or so I hope!
Yes. most of the unusual items are discretionary so if things take a downturn we can defer or eliminate. Daughter's wedding would be the exception.
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Old 02-21-2012, 12:16 PM   #55
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I had to laugh, since my (departed at age 88) FIL spent much more for the last ten years of his life, as his DW passed a decade early.

It seemed that he just "let loose" and was spending $$$ without regard for the future (of course, at his age, who could blame him ) after the death of his DW, and 50+ years of marriage.

He bought new cars, danced the night away (with more than a few different "partners"), traveled the world, and just "had fun" after he became a bachelor again (drove my DW nuts, with him acting as a "kid", again).

Sometimes, expenses don't go down as you age, if you're lucky ...
that is great!
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Old 02-23-2012, 02:57 PM   #56
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I suppose if you've got the data, it's true, but there's no way mine would be that low. Food costs alone are that high, not to mention gas, energy, home appliances, etc.

Fortunately, some things do come down. Examples would be large screen TVs and computers.

Perhaps your exclusion of large items is one reason, as I know cars have gone up quite a bit more than 2.3%.
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