Budget tracking and inflation spend

[tb001]

Curious, for those who have been tracking your budget for many years, do you see increased spend that tracks with inflation?

We’ve only been closely tracking for three years, but the majority of our expenses have not increased with inflation. We have a remarkably similar spend over the time period we’ve been tracking.

A big chunk of our spend is associated with our home (mortgage, property taxes and home services). Wondering if this is partly why we’re not seeing the increased.

 

[Blueskies123]

Something breaking around the house, on my body, or one of the cars dwarfs any inflation. It might be there but randomly getting a detached retina or broken transmission makes inflation insignificant.

 

[COcheesehead]

We've stayed about on course over the 3 years we've been tracking.
Groceries have gone down, but I think that is based more on how we shop. Cell bill down.
Cable up, property taxes up. Utilities up, but that is about the change. The new house has solar panels. Hehe.

 

[scrabbler1]

Curious, for those who have been tracking your budget for many years, do you see increased spend that tracks with inflation?

We’ve only been closely tracking for three years, but the majority of our expenses have not increased with inflation. We have a remarkably similar spend over the time period we’ve been tracking.

A big chunk of our spend is associated with our home (mortgage, property taxes and home services). Wondering if this is partly why we’re not seeing the increased.

Looks to me that you have been able to carefully isolate a common basket of goods and/or services from year to year in order to determine any effects of inflation. That is not always easy to do and I commend you for it.

Even within a common basket of goods or services, not every change in its price is necessarily inflationary. My electric bill is a single service but if we have a cool summer a year after a hot summer, my electric usage will drop as will my electric bill.

My cable-TV/phone/internet package has seen its price fall and rise (mostly rise) over the years. Discounts come and go, they nickel and dime me with new and higher fees and surcharges all the time. Health insurance premiums rise, but if deductibles and copays rise I have to take that into account and use my total med expenses. Then again, if I incur some med expenses some years and not in others, how do I isolate a common basket of goods services from year to year?

 

[tb001]

That’s a good point scrabbler. I’m wondering if our consistent spend is as much a function of just having an internal cap, as other have mentioned here before. On the bills I can look at on apples to apples basis though, they definitely track below inflation. Obviously the mortgage, but we didn’t see changes in most home services (eg alarm company, landscapers, etc...).

 

[tb001]

Something breaking around the house, on my body, or one of the cars dwarfs any inflation. It might be there but randomly getting a detached retina or broken transmission makes inflation insignificant.

Ah, probably true, though we’re budgeting and breaking these out, so I have our standard budget and then our non recurring expenses.

 

[SecondCor521]

I have spending records back to January 2007. They show me that my expenses are pretty variable month-to-month but over the past ~12 years my annual personal rate of inflation is right about 0.5%.

My belief is that most people on this board have an internal set point that they naturally gravitate to, such that if they spend more for a while they'll then spend less to get back to what feels right, and similarly if the spend less for a while then they'll feel OK splurging a bit. That's how I seem to operate anyway.

 

[FIREd_2015]

Curious, for those who have been tracking your budget for many years, do you see increased spend that tracks with inflation?

We’ve only been closely tracking for three years, but the majority of our expenses have not increased with inflation. We have a remarkably similar spend over the time period we’ve been tracking.

A big chunk of our spend is associated with our home (mortgage, property taxes and home services). Wondering if this is partly why we’re not seeing the increased.

I've been tracking expenses for almost 20 years. I went back and compared my expenses from 2003 to 2018. If I subtract out mortgage payments, health insurance and car payments the difference was surprisingly small - only about 4% over 15 yrs. The biggest change other than no more mortgage is health insurance costs. I went from a very good corporate health insurance policy to Bronze ACA coverage that costs over $1k/mon (if not subsidized) with a deductible of around $7000.

I see a lot of people quoting headline CPI numbers saying returns on investment needs to keep ahead of inflation. What most people don't take into consideration is that the housing component of CPI accounts for about 40% of the CPI number. If a person has a fixed rate mortgage or no mortgage then their personal CPI number is going to be significantly lower.

 

[tb001]

I have spending records back to January 2007. They show me that my expenses are pretty variable month-to-month but over the past ~12 years my annual personal rate of inflation is right about 0.5%.

My belief is that most people on this board have an internal set point that they naturally gravitate to, such that if they spend more for a while they'll then spend less to get back to what feels right, and similarly if the spend less for a while then they'll feel OK splurging a bit. That's how I seem to operate anyway.

That's interesting. I think you've mentioned that before and I tend to agree.

I've definitely noticed that when we see a price point we think is excessive for a product we've bought in the past, we shift our spend elsewhere. In thinking about it, my guess is frequently that price increase is probably due to inflation. For example, I was looking for a couple of new houseplants at home depot. I went in thinking they should be around $25, but they were closer to $70, which seemed ridiculous. Ridiculous until I realized the last time I'd bought a houseplant at Home Depot was in the 80s! I didn't buy any houseplants...

 

[tb001]

I've been tracking expenses for almost 20 years. I went back and compared my expenses from 2003 to 2018. If I subtract out mortgage payments, health insurance and car payments the difference was surprisingly small - only about 4% over 15 yrs. The biggest change other than no more mortgage is health insurance costs. I went from a very good corporate health insurance policy to Bronze ACA coverage that costs over $1k/mon (if not subsidized) with a deductible of around $7000.

I see a lot of people quoting headline CPI numbers saying returns on investment needs to keep ahead of inflation. What most people don't take into consideration is that the housing component of CPI accounts for about 40% of the CPI number. If a person has a fixed rate mortgage or no mortgage then their personal CPI number is going to be significantly lower.

Wow, I hadn't realized this. That makes a lot of sense and would explain why we just don't see a huge impact of inflation on our day to day.

 

[Dtail]

I've been tracking expenses for almost 20 years. I went back and compared my expenses from 2003 to 2018. If I subtract out mortgage payments, health insurance and car payments the difference was surprisingly small - only about 4% over 15 yrs. The biggest change other than no more mortgage is health insurance costs. I went from a very good corporate health insurance policy to Bronze ACA coverage that costs over $1k/mon (if not subsidized) with a deductible of around $7000.

I see a lot of people quoting headline CPI numbers saying returns on investment needs to keep ahead of inflation. What most people don't take into consideration is that the housing component of CPI accounts for about 40% of the CPI number. If a person has a fixed rate mortgage or no mortgage then their personal CPI number is going to be significantly lower.

Perhaps, but there also is the home insurance and property taxes which could at least track inflation.
We just bought a house and will find out.

 

[tb001]

Perhaps, but there also is the home insurance and property taxes which could at least track inflation.
We just bought a house and will find out.

Our property tax increases are capped at a max of 2%/yr, so that definitely helps. Home insurance has probably gone up, though in our last area it needed to to keep up with the cost of rebuilding.

 

[Spock]

Prop taxes and water/sewer are rocketing up.
Insurance was going up 10% per year, so I changed companies last week... which means it will probably go up 10% per year only from a lower base.
Taxes and insurance are my 2 biggest budget items after groceries.



One of my "burn the dough" spending splurges since RE was buying real orange juice. Just store brand at $3.50 a gallon (-10% on senior day once a month!). This month the price jumped to $4.50 a gallon... so I dropped it from the shopping list.


So in a way tracking base spending vs. inflation is only going to show up when inflation really gets bad... otherwise we adapt in real time (shop harder, more sales, change vendors/brands, etc) to contain the budget.

 

[Scuba]

Our health care cost increases are blowing away everything else. Premium is up 25% for 2019. Our property taxes are up 40% vs 5 years ago.

 

[tb001]

Our health care cost increases are blowing away everything else. Premium is up 25% for 2019. Our property taxes are up 40% vs 5 years ago.

Wow. The healthcare changes are big, but maybe not surprising. Property taxes are nuts though. I’m thankful for California’s cap!

 

[kgtest]

Curious, for those who have been tracking your budget for many years, do you see increased spend that tracks with inflation?

We’ve only been closely tracking for three years, but the majority of our expenses have not increased with inflation. We have a remarkably similar spend over the time period we’ve been tracking.

A big chunk of our spend is associated with our home (mortgage, property taxes and home services). Wondering if this is partly why we’re not seeing the increased.

I basically just track total expenses. Looks like this years will be less than last by about 10%, so in that regard I am beating inflation. It might creep up but we have some wiggle room. Need to keep my energy bill in check that thing went up like 30% from last year alongside our usage.

Less TV, less power usage, less heat in 2019 lol. 2nd kid probably contributed, plus we decided to keep house a little warmer with 2 kids. Oh and we've had some cold stretches.

 

[wmc1000]

I first created a spreadsheet to test when I thought I might want to retire and when we should start SS.

Also, please note that we do not have any pension income or million dollar plus investment holdings to rely on.

I modeled 3 scenarios in the event of 1 of us dying at 65, 75 or 95. I included the 23% haircut to SS in 2034 and projected major expenses in future years, (cars, roofs, hvac and appliance replacements, etc.).

Then I budgeted a 4% inflation and 2% investment returns. When all scenarios projected "enough" and retained an asset balance to cover at least 3 years of assisted living arrangements for 1 of us and not including home equity that could serve as the remaining spouse's potential assisted living needs or downsizing to an apartment I felt "comfortable" with my personal plans.

Each scenario includes the reduction to 1 SS payment upon the first death to 1 at the various ages.

Apologies if this is a bit morbid but I like to cover my potential bases and if it was me first DW would not have to worry or be relying on our 3 daughters families to remain comfortable financially.

Our spreadsheet also modeled different SS draws and if SS gets cut it showed that in our case, given the parameters I had established, if we both lived to 95 there was no significant difference in asset balance whether we started SS at FRA, (66), vs 70 which made our decision very easy. We are taking the money at 66.

 

[marko]

Something breaking around the house, on my body, or one of the cars dwarfs any inflation. It might be there but randomly getting a detached retina or broken transmission makes inflation insignificant.

This is true for us.
We have a relatively small core set of expenses (utilities, prop taxes, HC, car leases etc)--maybe 10% of monthly spending and then a large monthly CC that handles our discretionary spending (travel, eating out, clothing, boats, etc).

As others have noted, we tend to just live our life and our expenses fall within the 90% discretionary. So we unconsciously modify/adjust that piece as we go along. I'm sure along the way something may have fallen off our spending but have no idea what it is. What we do find is that our discretionary is fairly stable but we just spend on different things year to year.

 

[imoldernu]

Our total spending has gone down each year for the past four or five years.
I looked at my macro budget from 2014... not detailed but tied in with our expenses at the time. The down changes had nothing to do with inflation, just less spending.

It's age !
What's up, what's down, and what is basically the same over the four years.

Up: 4Yr. total
Dues for Woodhaven camp.. $250 (4yr. inc in dues).
Medicare B and D total $2400
Netflix ( now cancelled) $36
House taxes $1200
Auto License $40
Medication $2400
Utilities $1200


Same:
House and auto Insurance (reduced collision coverage)
Food at home
Repairs/maintenance
Dental
LTC insurance
Subscriptions
Tax and Insurance for Woodhaven
Tech... internet and electronics

Down 4 yr. total:
$16,000 (sold our Florida house)
Eating out $3200
Auto fuel /maintenance $1400
Sin... booze, party $1600
Travel $4000
Toys, tools etc.. $2000

It's a matter of doing less, slowing down getting old. Since we don't do much buying for clothes, house decor, it's hard to look at price comparisons.

 

[walkinwood]

As others have said, looking at inflation at a family level is quite meaningless because spending is influenced by so many factors other than inflation itself. Inflation is only meaningful when measured over a large population where personal impacts can be factored out.


Our spending over the last 10 years has a standard deviation of almost 25%. In that time, we've moved from NJ to CO, sold & bought a house, done improvements to the house, bought & sold cars, ACA came into existence, tax laws have changed, we're 10 years older and our interests have evolved.


We use a percentage (~4%) of our portfolio on Jan 1 to guide our budget, so CPI-U doesn't really factor into our budgeting process. And as long as there are good reasons, we've gone over our budget. Over 10 years, that's happened twice.


Good luck

 

[jkern]

My personal inflation rate goes up faster than the CPI.

Property Taxes: 15% over the last 3 years even though CA has a 2% per year cap. There are always extra items being added.

Health Insurance: 128% over the last 3 years. Ouch.....

Home/Rental Insurance: Home insurance has been steady at an increase of about 5%, but the Rental insurance just went up 27% this year.

Utilities: 25% over the last 3 years. Gas, electric, water and garbage have already been approved for about 8% to 10% increases for the coming year.

Many discretionary items have been on the rise (restaurants etc.) but I can control the spending simply by reducing my consumption. Overall, CPI doesn't represent my inflation rate.

 

[Spock]

The huge retail inflation that took a noticeable jump in the 2008 collapse is the oft joked about but very real shrinkage in packaging but the prices stayed the same. We've kinda gotten into cooking (cast iron!) in retirement and a lot of recipes have gotten tweaked because the cans are smaller.
The cookies and muffins at costco are now a fraction of the size they were in say 2002.
Johnsonville Brautwurst are noticeably shorter (I can fit more on my 12 year old grill).
Ice cream no longer comes in a half-gallon container, they're now 54 oz. (I just pulled one out of the freezer and the dang bucket is now only 48oz!!!!!)


Shrinking packages (food, get your mind out of the gutter) have been joked about for as long as I can remember, but it went into over drive during the dark days of the "Great Recession".

 

[scrabbler1]

The huge retail inflation that took a noticeable jump in the 2008 collapse is the oft joked about but very real shrinkage in packaging but the prices stayed the same. We've kinda gotten into cooking (cast iron!) in retirement and a lot of recipes have gotten tweaked because the cans are smaller.
The cookies and muffins at costco are now a fraction of the size they were in say 2002.
Johnsonville Brautwurst are noticeably shorter (I can fit more on my 12 year old grill).
Ice cream no longer comes in a half-gallon container, they're now 54 oz. (I just pulled one out of the freezer and the dang bucket is now only 48oz!!!!!)


Shrinking packages (food, get your mind out of the gutter) have been joked about for as long as I can remember, but it went into over drive during the dark days of the "Great Recession".

I have seen a lot of this, too, over the last few years. My favorite brand of chocolate chip cookies has downsized twice, from 30 cookies to 27 to 24, while the price has been unchanged or has even risen slightly. This is why watching the unit pricing labels on the store's shelves is so important. It is very tough to find a decent package of choco chip cookies which costs less than $4 per pound.

Potato chips, my other guilty pleasure junk food, is another frequently downsized item which rarely costs less than $4 per pound. They slap a "Sale $2" sticker on the bag but it's only a 7-ounce bag, hardly a bargain. Then the 7-ounce bag become 6.5 ounces then 6 ounces, increasing its price per pound.

 

[Sunset]

As others have said, some spending varies so much it overwhelms any inflation factor:

example for us over past 3 years Travel spending, $650 , $7,000 , $17,500 .

Sometimes the spending for it in 1 year is for the travel the following year.

So far this year we have spent $2,000 , no idea what the number will end up,

 

[W2R]

I retired on 11/9/2009. Attached is a graph of my annual spending since and including 2010. (This graph doesn't include the one time costs solely due to buying my Dream Home in 2015.)

I spend what I want and need to spend, and do not have a budget per se. I just keep close track of my spending and play it by ear. If I just spent a boatload of cash on dental work, I might delay other big purchases for a little while, for example.

I'd say that inflation has not been bad for me SO FAR... which doesn't mean it won't hit me like a ton of bricks at some time in the future.