Inflation vs. Personal Inflation - How has your annual spending changed?

[DawgMan]

I am newly retired as of start of 2022. Run all the calculators and traps and feel good about my plan and all the available levers I can pull if required. Assuming like many, when I mapped out my plan at end of 2021, I made certain assumptions on the annual growth of my spend using an arbitrary inflation index of 3%/yr. In my case, DW and I are both 58 with no pensions, so we rely on our assets to fund RE. We do have a relatively high planned annual spend that is very discretionary. As it stands right now YTD, I am tracking to be about 10 -15% below our planned spend. While clearly inflation has had an affect (i.e. groceries), our "personal inflation" has not stressed our spend. While we could do more gifting, make more home improvements, or buy more stuff to fill to hit our number before year end, it seems silly to do it "just cause". So now, as I look forward to 2023, I plan to hold our spend plans "as is" as opposed to adding the a 3% bump.

Old-timers... how has your annual spend changed relative to inflation and/or personal inflation? I realize the more fat you have in your budget, the less pain you may feel, but are you spending that much more than you did say 3, 5, 10+ yrs ago?

 

[ShokWaveRider]

This analysis is pointless unless one discloses what part of the country one lives in. We are in Northeast Florida.

Based on our expenses over the last 5 years, it has changed minimally. At least we have not noticed. I just track utilities and food and they have been with 2%, two of these years it actually remained constant.

Home Real Estate taxes actually went down for the first 4 years of us moving in, but we do not track that as part of our personal inflation. Car insurance has stayed constant for us. Home Insurance has varied as we update it or change providers as needed, it has gone up over the years though, but this year it actually went down. Flood insurance has steadily increased, but not by anything significant.

 

[Surewhitey]

I look at big picture numbers and we spent exactly the same 2021 over 2020. 2022, on track for 8-9% increase. I then think about what we got "extra" for the additional. In our case, much more travel (Italy, Colorado, California and Mexico).

My gut says we spent more on food and a little more on GK's (2 now). A $4-5k more this year is totally understandable for the value we got. Obviously we don't want to go up 8-9% every year, but it's still below our "budget"...

 

[Dash man]

Food is the only thing really noticeable that has been affected by inflation in our spending. We delayed a kitchen/bath remodel mainly because of the stock market drop more than inflated costs. We didn’t want to sell shares while down so much.

 

[Montecfo]

few if any changes here

Here in the Mid-Atlantic, we have not experienced much in the way of change of lifestyle. Food prices have risen but not enough to make much of a dent in terms of the thing we buy. But we have found Costco a good source, and we buy met on sale at the many grocery stores nearby.

Eating out has gotten a bit more expensive for sure. but we do most of our eating at home. And when we do go out we never run up a big bar tab. In fact we often avoid alcohol out since that has always seemed ay overpriced.

We do not drive enough for gas to be an issue. I am sure we re spending more per travel day, but we are value oriented and seem to find good deals.

 

[Car-Guy]

Old-timers... how has your annual spend changed relative to inflation and/or personal inflation? I realize the more fat you have in your budget, the less pain you may feel, but are you spending that much more than you did say 3, 5, 10+ yrs ago?

Not an "old-timer" but I thought I comment anyway. I've been retired ~10 years now and my annual spend is way down, especially over the past two to three years... Mostly due to cutbacks or elimination of my hobbies, not due to cost/money but other factors.

I don't track my base spend (food, utilities, etc) but I except that is pretty close to the same, maybe a little more, but not much. The only thing I'm sure is really up is my gas bill since I still drive about the same amount which is a lot, IMO.

 

[PatrickA5]

Even though I track every penny in Quicken, I couldn't tell you exactly what categories have gone up due to inflation versus just buying more (or less) items. Way too many variables. I know my utilities are higher. Gas is higher. Insurance is flat. Food is on pace with prior years.

 

[braumeister]

In our case it varies wildly from year to year, almost entirely due to varying travel expenses.

 

[scrabbler1]

I am spending less that I spent 3, 5, 8 years ago (and I retired in late 2008 at age 45). But the reason why my total spending is down has nothing to do with inflation or anything related to personal behavior.

What I did at the very end of 2019 was to sell all my shares in an actively managed stock mutual fund I had been in since 1996 during my working days, and buy the same amount in a comparable stock index fund. This did 2 things: (1) it reduced my income taxes with the elimination of large cap gain distributions (and smaller dividends), and (2) it got me back on the ACA premium subsidy train, something I had fallen off in 2017. Together, these expense reductions have reduced my overall spending to around the level it was before the ACA, when for a few years I was underinsured.

My expenses excluding income taxes and medical costs have been rather stable, actually declining slightly since 2018 (when my main hobby ended). They had a slight uptick in 2021 over 2020, likely due to inflation, and will probably rise a little in 2022.

 

[HarveyS]

From 2106 base (assume $100,000), our annual spend has varied from $83,000 to $116,000. This is in dollars spent in the year with no correction for inflation. Like others, I have no idea what was inflation, personal inflation, or just changes in what we did and thus spent money on.

 

[aja8888]

79 here with DW at 77. I'm healthy, she's not. Living in Texas with a paid off house, no debt, our biggest spending increases came in health care (out of pocket drug costs) and house and auto insurance. Property taxes were up a bit, but so was the house value.

Groceries have not been noticeably much more as we are simple eaters and eating less as we get older.

Things break, but I can fix them. Yard maintenance is handled by the HOA and I still take care of the rear grass and plants.

Travel costs are minimal as long, expensive trips are not taken anymore.

Life gets simpler, but a bit harder, as one ages, if you are lucky.

 

[FiveDriver]

It has been said that the biggest drivers of this current round of inflation are Food, Fuel and Financial Interest Rates.

We track our grocery spending very closely using the AmEx Blue 6% Cash Back card for all Grocery purchases. Thanks to DW's savvy shopping habits, we haven't seen a major increase going back 2 years. It's held steady at around $600 per month. At the end of the year, we cash in about $400 in rewards.

Dining Out is a different category and is up slightly, but still within our budget parameters.

Fuel prices are up, certainly. But DW's car sips gas. My car is just a weekend cruiser nowadays. DW fills up once a month for $60 bucks, and I fill up every other month. That's $90 bucks per month and well within our $100 budget.

Interest Rates are a non-issue. No Mortgage and no Credit Card Debt. The High Yield Savings account is a positive factor, not a negative.

Real Estate Taxes did not increase this year. Neither did our Car Insurance. DW is climbing aboard the Medicare Gravy Train in February, her Health Insurance drops from $580 to about $200 per month.

You can be assured that this Turkey Day we said an extra Thanks.

 

[MichaelB]

Old-timers... how has your annual spend changed relative to inflation and/or personal inflation? I realize the more fat you have in your budget, the less pain you may feel, but are you spending that much more than you did say 3, 5, 10+ yrs ago?

Our spending has increased substantially over the past 10-15 years.

Early in my retirement my withdrawal rate was >5%, and that led me to slow the rate of yearly growth. The past decade+ was very good to the portfolio, and even as I eased up and increased our spend, the withdrawal rate continued to decline. Our real, inflation adjusted spending has increased considerably, at the same time our withdrawal rate has declined to 3.5%. It could get lower without a real loss in lifestyle.

IMO inflation impact can’t be measured over short periods of time. It’s too difficult to distinguish changes in spending that respond to price increases with changes that are driven by lifestyle.

The portfolio also doesn’t rise synchronized with budget increases, so a year like the one we’re having now is negative for portfolio survival. Longer periods are needed to assess the real impact inflation has on portfolio and spending.

 

[W2R]

Old-timers... how has your annual spend changed relative to inflation and/or personal inflation? I realize the more fat you have in your budget, the less pain you may feel, but are you spending that much more than you did say 3, 5, 10+ yrs ago?

OK, I spend a lot less than FIRECalc says I could. My aim is to maintain what feels to me like the same lifestyle as always, because I am comfortable living this way.

Using my projections for total 2022 spending and comparing with 2019, 2017, and 2012:

10 years: 2022 spending was 125% of 2012. CPI-W increase 120%.
..5 years: 2022 spending was..94% of 2017. CPI-W increase 114%.
..3 years: 2022 spending was..86% of 2019. CPI-W increase 109%.

I don't know what if any good these figures will do for anyone, but it is always fun to compute stuff like this so there ya go.

 

[Pellice]

I haven't felt the bite of inflation yet because certain categories of spending have decreased, particularly cell phone bills, and, to some extent, energy costs due to a warmer winter. Groceries have gone up, but I really notice it in pet food more than my food! I'm doing more and more cooking - started making all my own desserts, and replaced ready-made food for lunch (such as cold cuts) with my own soups and whatnot. My property taxes are now frozen and I expect a rebate this year.

 

[DawgMan]

Well, based on the responses, I can't say I'm too surprised that annual spending by most was indifferent to inflation. Clearly having no debt and a low "needs" overhead with more significant discretionary spend offers allot of flexibility. Since I am only 1 year in I suppose to appease parts of my conservative nature I will continue to forecast my 3% annual growth in spending until I get my sea legs. None the less, its encouraging to hear the responses.

 

[rk911]

our spending habits have not changed. we are in the process of rehabbiing thee garage...new roof, new door, new gutters. we buy what we want, give generously to charity and to family and have no worries. well, no personal financial worries.

 

[Teacher Terry]

It’s difficult to say because I was married until 21 months ago. Then my son lived with me for a year and bought all the food instead of paying rent. It was a win win for both of us. Food, car gas, vet bills and all my insurance’s have been the biggest increases. I am determined to live on my income only using savings for emergencies and travel.

When my son lived with me I could put some money in savings and now I can’t. My income goes up about 1200/ year. If I hadn’t married my last husband my condo would have been paid for and would still have most of my retirement savings(

 

[daylatedollarshort]

We actually come out ahead with high inflation because our expenses subject to inflation are a fair bit less than our inflation adjusted income - low fixed interest mortgage, capped property taxes, and SS and TIPS income pegged to inflation. Our mortgage is actually a money maker right now because the invested mortgage money in TIPS is earning more than inflation while costing us less than 3%, so we've been pocketing 6 - 7% on the difference. We live in an urban area with good public transit so we only use about 1/2 tank of gas a month. We keep a price spreadsheet and shop at outlet and warehouse store for groceries so those costs just aren't a very high percent of our budget.

I do think about money often and how can I get better investment returns or lower overhead, but we don't really ever worry about money because our overhead and withdrawal rates are pretty low. We also live where there are a lot of fun free and cheap things to do every week, so we can have a fun retirement and not have to spend a fortune. Like today we went to a museum and a state park both for free with annual membership programs.

 

[JoeWras]

Fuel, utilities, insurance of all types, food, local taxes and home maintenance have very clearly gone up for us .

This has a direct impact on our budget and has made our personal inflation rate similar to the CPI.

We have no pensions or cola. The only plus on the income side is we've moved into Tbills for our fixed income and are finally making some money there, although less than our personal rate.

DW has done well with food costs by careful shopping and substitutions, but we've finally been overwhelmed by the rises in the last few months. It is starting to sting.

It didn't seem to matter much until recently. Right now it hasn't changed our big long range plans. If it keeps up for a few years at this rate, we may have to pivot in some way.

 

[DrRoy]

We RE'd 5 years ago. The first year's spending was the lowest. Since then, our spending has jumped as we did expensive travel and several remodelling projects on the house. The high year was more than double the first year. This year spending was down since we were done with all the projects, but we replaced the car. We are definitely noticing inflation at the grocery store, but that is a relatively small portion of our spending. Next year will be our second lowest spending year since RE, only because the "special" spends are done for a while. Still will have $40K or so for travel.

 

[Philliefan33]

Our total spend YTD is lower than average, primarily due to selling our primary home and moving (temporarily) to our vacation home. We saved about $6K on property taxes alone, plus utilities.

My gut feeling is that we are spending a little more on groceries. I know we have spent less on eating out. Gas spend is probably higher since the vacation house is in the sticks so we have to drive further for groceries and other necessities.

 

[ShokWaveRider]

I will soon be able to post our 2022 averages after our December Water and Electricity bills come in. They will not be bad at all and almost identical 2021. No complaints for Northeast Florida Living in a 3,300 sqft. home 1.5m from the beach.

 

[jebmke]

I retired in December 2007. I track total spending monthly and annually since but I don't waste any time on details. I have been surprised by two things. One, the average annual spend has been pretty close to the budget I created prior to retiring. Two, the year-to-year variations are much larger than I think I expected back then.

The first 2-3 years were the highest spending we had when looking at the total without income taxes, despite the fact that we retired into a slight down tick in the stock market.

 

[pacergal]

Retired six years, so not long term yet. We planned our retirement budget based on pre-retirement budget.
We have secure income (pensions), and knew approx. what our income would be. Our pensions are a bit more than what we lived on while working, and with SS on board, we actually spend more than before. Easy to do with 3 grandkids!
Our son also lived with us for about a year during first covid wave.
We also put extra into savings every month. I am and have been a saver all my life.
We are definitely blessed with what we have in life.