How Will Inflation Affect Your 2022 Planned Spend?

[brett]

We only pay attention to our annual after tax spend. The categories can vary quite a bit from year to year.

Our budget is flexible enough that if we could easily change or shift our spending habits.

To a certain extent we have done this over the years when travelling. We always consider the impact of currency. When we first retired a South Africa trip was at the top of DW's list. Their currency was weakening. We delayed a year and saved 15 percent simply because of currency conversion.

I am buying wine from Argentina lately. Prices are down because of currency and because of their economic situation.

Just stocked up two weeks ago on some imported Thai food products that we use. We cannot snowbird there so we are cooking our own Thai. Bought what we needed for the next 9 months or so before prices went up and availability went south. In Feb we locked in our gas and hydro rates for the next three years.

 

[Animorph]

I'll increase our budget by 5.9%. We've been underspending compared to our budget, so we have built up some cushion if needed.

Last time inflation was this high was our bump for 2009, 5.8%. I just used 0% for that year because I felt it was just a blip, which it turned out to be. I'm thinking half a blip this time.

 

[daylatedollarshort]

We have pretty low overhead so I don't see inflation being a big issue for us. Not low overhead like $8K or $30K a year expenses like some members here, but at least pretty low for a high cost of living area and relative to our retirement income. Our regular, annual expenses subject to inflation are less than our Social Security benefits, which are indexed to inflation. I think we are pretty well covered there. Our property taxes won't go up much due to Prop 13 and our low interest rate, fixed mortgage won't go up at all, so inflation won't impact those expenses. We also have a high asset allocation to TIPS bought when prices were lower, and those do really well with high inflation.

Our grocery costs really haven't gone up much this year. We follow the Tightwad Gazette style of grocery shopping, doing price comparison and stockpiling closeouts and loss leaders. The sales and closeout prices on groceries appear to me to be as good as they have always been to me. Like we went to Safeway recently for $5 Friday specials, plus used store coupons, to get $165 worth of groceries and beer for $75.

Live events in our area are still pretty cheap. We attend lot of seat filler, annual passes, Facebook specials, college and half price Goldstar events and those prices haven't really changed. Restaurant prices are much higher this year in our area, but it is actually usually cheaper for us to go to a concert or play than out to eat, so we don't eat out that much and do the live events for fun instead.

Gas is up but we live in an urban area near a state park, so hiking, shopping and doctor appointments are mostly within a few mile radius. We only bought one tank of gas in the last two month and that was at Costco.

We do plan to buy more TIPS even though the prices are high because they still work for our retirement finances. And we're going to try to max out the I-bonds each year for us, plus are considering gifting I-bonds to our adult kids as a way to increase the annual per person purchase limits.

 

[Still Learning]

Inflation is hitting us less in retirement; for now, since our living costs are lower after leaving work 2 years ago. The longer it continues the impact will become more significant. Wish it was the only significant issue affecting everyone.


Just completed our last billing cycle for the year which was mostly good news except for mutual funds starting to go soft. Will make some adjustments but have no need to change discretionary spending going into 2022.

 

[Souschef]

Both DW and I are on SS, so we will get a COLA adjustment. However, our rent will also go up IAW local rent control.

 

[jollystomper]

We really do not seeing it impacting us. Even with inflation we would still below our projected cash flow spend for 2022 that we estimated before I retired in 2018. There might be some tweaks. but nothing to cause agony and worry.

 

[joesxm3]

In the six years since I retired, I have not tried to follow a budget. I have found that most of the impact on my annual spending is the large ticket items and that the smaller ones do not add up to enough to be worrying about.

What I do to track my spending is just add up all the transfers from my brokerage account to my checking account and then subtract any transfers from checking for investment purposes. That gives me a gross number for my annual spending. This has come out a bit lower than I had put into my pre-FIRE planning spreadsheets.

That being said, with the supposed 7% to 15% inflation rate on my mind, I started to make a revised planning spreadsheet and was shocked to see what happened 10 or 15 years out if I modeled the inflation rate at 7% and compounded it year on year.

The first few years it was just higher spending numbers, but after a while it really got out of hand. The "magic" of compound interest in reverse.

I suppose it may not be realistic to assume that the super high inflation rate will continue for twenty or thirty years, but who knows. Scary stuff.

 

[brett]

delete

 

[brett]

In the six years since I retired, I have not tried to follow a budget. I have found that most of the impact on my annual spending is the large ticket items and that the smaller ones do not add up to enough to be worrying about.

What I do to track my spending is just add up all the transfers from my brokerage account to my checking account and then subtract any transfers from checking for investment purposes. That gives me a gross number for my annual spending. This has come out a bit lower than I had put into my pre-FIRE planning spreadsheets.

That being said, with the supposed 7% to 15% inflation rate on my mind, I started to make a revised planning spreadsheet and was shocked to see what happened 10 or 15 years out if I modeled the inflation rate at 7% and compounded it year on year.

The first few years it was just higher spending numbers, but after a while it really got out of hand. The "magic" of compound interest in reverse.

I suppose it may not be realistic to assume that the super high inflation rate will continue for twenty or thirty years, but who knows. Scary stuff.

That is exactly what we do.

Absolutely not interested in what we spend on toothpaste, peas, or clothing. So we do not even bother. I take a tape of monthly after tax spend. That is the extent of it. Five minutes a month at most with our bank statement.

Not enough to concern us, besides this in not where we would consider cutting back if we had to.

We focus on large ticket items, recurring items such as insurances and internet/cell/tv each renewal period. Just reduced our com costs by 35 percent by renegotiating rates with our service provider. Did the same earlier with insurances.

I find that the benefit from time spent on reviewing/adjusting our investment portfolio or speaking financial advice far exceeds the benefit that we could derive from monitoring our spend on day to day necessities and spend.

 

[ShokWaveRider]

Not in the slightest. We are not likely to pay a $50k premium for a truck, or any other car for that matter, so all is good.

 

[Fermion]

Not in the slightest. We are not likely to pay a $50k premium for a truck, or any other car for that matter, so all is good.

I want the Ford Lightning F150 with the 131kWh battery (yeah I know I know, all the problems I had with my 2017 F150 4x4 and the warranty disallow but I am giving Farley a chance, he is a gearhead after all).

So, I am buying 3000 shares of F at $19 and will sell it next year for $30 and use the profit to help offset the cost of the F150.

Then I am going to make the most bad ass truck camper you have ever seen, capable of boondocking for weeks without running a genset (as long as you don't have to drive too far to get to the campsite lol)

 

[scrabbler1]

That is exactly what we do.

Absolutely not interested in what we spend on toothpaste, peas, or clothing. So we do not even bother. I take a tape of monthly after tax spend. That is the extent of it. Five minutes a month at most with our bank statement.

Not enough to concern us, besides this in not where we would consider cutting back if we had to.

We focus on large ticket items, recurring items such as insurances and internet/cell/tv each renewal period. Just reduced our com costs by 35 percent by renegotiating rates with our service provider. Did the same earlier with insurances.

I find that the benefit from time spent on reviewing/adjusting our investment portfolio or speaking financial advice far exceeds the benefit that we could derive from monitoring our spend on day to day necessities and spend.

I call my TV/Internet/Phone service provider at least once a year to see if there are any new discounts available. I also do this because some of the discounts I get now have close sunset dates. I can usually get some new discount and/or some temporary added service (even if it is not really desirable). Calling them this often can be a PITA, especially if the wait times are too long (they are usually tolerable). But saving $20-$40 per month is worth the effort. Otherwise, I'd be paying more for my trio of services than I would for my health insurance!

 

[CDRE]

FWIW: Here is an article describing how to compute your personal Inflation Rate:

https://money.com/rising-prices-personal-inflation-rate/

This Link to the spreadsheet is hidden (kinda) in the article:

https://view.officeapps.live.com/op...tent/CMSImages/15150.xlsx&wdOrigin=BROWSELINK

Thank you for sharing this information, especially the useful spreadsheet (yup, it's somewhat hidden).

 

[brett]

I call my TV/Internet/Phone service provider at least once a year to see if there are any new discounts available. I also do this because some of the discounts I get now have close sunset dates. I can usually get some new discount and/or some temporary added service (even if it is not really desirable). Calling them this often can be a PITA, especially if the wait times are too long (they are usually tolerable). But saving $20-$40 per month is worth the effort. Otherwise, I'd be paying more for my trio of services than I would for my health insurance!

Same for us. Just realized a 750 per year saving from our com provider along with a service enhancment. Earlier in the year we dodged a 25 percent increase in our home insurance by negotiating/questioning. Locked in our gas and hydro rates for three years. Those items, in total, have saved us about $ 1200-1500 annually going forward. It puts a huge dent in our personal overall annual inflation rate spend on the basics.

It took 15 minutes to secure better com pricing, and it included some enhanced services. Insurances took about an hour. Utilities 10 minutes on line to navigate through to our desired end point.

 

[bobandsherry]

I call my TV/Internet/Phone service provider at least once a year to see if there are any new discounts available. I also do this because some of the discounts I get now have close sunset dates. I can usually get some new discount and/or some temporary added service (even if it is not really desirable). Calling them this often can be a PITA, especially if the wait times are too long (they are usually tolerable). But saving $20-$40 per month is worth the effort. Otherwise, I'd be paying more for my trio of services than I would for my health insurance!

Fortunately, our HOA includes cable (basically everything but the Premium channels) and internet (500/500). Started at $60/mo, limited to 5% increase and contract for 10 years. Saves me big money now and the hassle to negotiate each year. Went through that song and dance number from years with Comcast.

 

[karen1972]

I expect to spend less this year with the refinancing of the house, shopping for better insurance plans, and being less aggressive with Roth conversions so taxes down, aca subsidy up.

Investment strategy not changing too much as cash is already filled for the next few years so other than buying more i-bonds come January, not sure much will change there.

I did do some shop ahead buying discounted gift cards recently. Hard for me to pass up 20% off a place I'm going to eat at anyway.

 

[ExFlyBoy5]

We'll be getting nailed, having committed to building a house. Window company prices went up 30% since we starting talking in April. Friday we entered our window order to avoid the 7% increase that comes tomorrow. Our builder is very concerned about the price of OSB skyrocketing due to the tornado rebuilding so he has ordered what we'll need even though excavation won't start until March 1. Lumber prices going nuts again (https://markets.businessinsider.com/commodities/lumber-price), helped by Biden's doubling of tariffs on Canadian lumber. ... and the beat goes on.

I'm guessing that inflation factors will add $50K+ to the cost of the house since we began talking about it.

Yes, all unfortunate factors right now. We have a family member that is trying to build a house and is now on their FOURTH builder. Just not a great time to try and build.

Personally, we have noticed an increase in consumer goods but as others have noted, we have also had some fantastic returns as of late. We aren't cutting back out of necessity, but in regards to eating out...we have cut back because it seems like the food quality has gone down hill a bit.

 

[Hyper]

We'll be getting nailed, having committed to building a house. Window company prices went up 30% since we starting talking in April. Friday we entered our window order to avoid the 7% increase that comes tomorrow. Our builder is very concerned about the price of OSB skyrocketing due to the tornado rebuilding so he has ordered what we'll need even though excavation won't start until March 1. Lumber prices going nuts again (https://markets.businessinsider.com/commodities/lumber-price), helped by Biden's doubling of tariffs on Canadian lumber. ... and the beat goes on.

I'm guessing that inflation factors will add $50K+ to the cost of the house since we began talking about it.

Same for us. We're three weeks away from closing on the sale of our home and started building a cabin this fall.
We have the septic, leach field, cistern, foundation and floor completed and logs arrived today!
We've been absolutely hammered, literally! I've driven thousands of miles after all the materials we've needed because they weren't available closeby.
The great is that we sold our current home for an unbelievable price with a contract in 4 days. The bad is that we're easily paying over 75% on most building materials if not more.
Yes there's inflation but there's also as much fleecing! Another great point is we're doing all the work ourselves.
We'll most likely finish part of it to live in, then play until the coming recession, depression to finish it. No way we get out of this and just go back to normal, imo.

 

[Fermion]

I missed that comment about window prices but dang, yes! We ordered something around 15 windows for the house we are building ourselves and they were an average of about $450 each. We had to buy two more for the dormers and they had gone up to $700! Ouch. Just bent over and paid the man though...not a lot else you can do.

 

[ExFlyBoy5]

I missed that comment about window prices but dang, yes! We ordered something around 15 windows for the house we are building ourselves and they were an average of about $450 each. We had to buy two more for the dormers and they had gone up to $700! Ouch. Just bent over and paid the man though...not a lot else you can do.

My DW heard from one of her employees (a R/E agent) that a pretty big builder in town has gotten hemmed up by the city because they were trying to "delete" windows from bedrooms in some of the houses they are building. Local code requires windows in a bedroom, but apparently they were looking to cut corners in regards to expensive items. I would be afraid to see what corners they might have cut (that aren't easily caught) trying to save on costs.

 

[Fermion]

Yes, you start adding up the costs of building a house now and then you start eyeing all those "cheap" existing houses that have only gone up 40% in the past year.

And we have not yet gotten to electrical (/cry). I hear wire is gone way up with copper prices.

 

[Dtail]

I don't budget specifically with inflation in mind, but effectively my transportation budget will be going up next year due to mainly the heavy increases in gas prices.
So indirectly inflation affects the budgeting.
Just one of many examples.

 

[kgtest]

Still working. I went and got a job that paid more.

Although this past year I had 2 jobs for a period of time so I won't actually earn as much as I did this year.

I also won't be spending $40,000 on a deck remodel, but will be paying off $15,000 coming due on 0$ interest.

Its complicated.

All in all it looks like our base categories will go down as daycare expenses will go down. Taxes will probably stay the same in the end, but property tax is going up and so is insurance.

I tried shopping around for better car insurance but nobody could beat our current premiums through state farm.

I will be spending less on vacations, mainly because I prepaid for some vacations this year that have 2022 travel dates. And I won't need to spend as much prepaying in 2022 for our 2023 vacations as I will have free condo rental so travel costs theoretically should go down.

With the raise, and the decrease in home maintenance, I should be fine. Anything extra will go into the markets...anything I come up short on will mean we just save a little less for our future.

With a young family of 5 I knew 2020-2023 would be our toughest years to weather financially...just sucks the reality of inflation is finally being realized during this "stormy" financial period.

Mainly gonna stay the course...but we could decrease our food budget as I ate out a lot this year. We could be smarter about buying hosehold items, and less activities out and things for the kids etc. Basically just be a little more conscious of spending. I've always kinda went over my budget as it seems I can never account for everything. But that's okay. The budget isnt set in stone.

 

[RobbieB]

I expect to pay 7% more due to inflation.

Nah, I'm not cutting back, I'm spending more. Blow that dough!

 

[aaronc879]

Housing costs have gotten out of control so I probably won't go down to Florida like I was planning to this Winter. My total spending in 2022 could easily be under $15K now that mortgage is paid off. Maybe even under $12K.