We end up talking about whether the CPI-U is really an accurate measure of our own personal inflation rate. It comes up related to I-bonds and TIPS and social security benefits.
But wasn't sure how I could develop an accurate estimate of my own personal inflation rate. The more I thought about it, the more complex the problem seemed. If you were such a creature of habit that you always bought the same things in the same quantities every year, it would be easy, but my personal spending varies significantly from year to year.
It turns out the Dept. of Labor provides a lot of information about CPI and includes a number of calculators that allow you to look at your spending profile in your region of the country.
US Dept. of Labor:
http://www.bls.gov/cpi/
CPI is developed using goods and services data collected throughout the month from 87 different urban areas throughout the country and from about 23,000 retail and service establishments. Data on rents are collected from about 50,000 landlords or tenants.
The weight for an item is derived from reported expenditures on that item as estimated by the Consumer Expenditure Survey.
The web site discusses why you might experience a very different inflation index: The Consumer Price Index--Why the Published Averages Don't Always Match An Individual's Inflation Experience
http://www.bls.gov/cpi/cpifact5.htm
I decided to look at how the CPI basket of goods and services compared to the salaryguru's experience last year. Here's the results
....................................Relative Importance
.....................................CPI-U
....................................average......salaryguru
Expenditure category.(Dec.2001)......family
------------------------------------------------------------
Total (all items)............100.0...........100.0
Food and beverages.....15.7.............8.3
Housing.........................40.9............34.4
Apparel...........................4.4.............1.3
Transportation..............17.1............17.7
Medical care....................5.8............12.1
Recreation.......................6.0............15.0
Education .......................5.8.............1.7
Other goods & services...4.3.............9.4
------------------------------------------------------------
Total, all items...............100.0...........100.0
The online tools allow you to look at the measured inflation of each expenditure category in each survey area. In theory, that would allow you to get a pretty good estimate of your own personal inflation rate. I haven't gone through that effort yet.
But wasn't sure how I could develop an accurate estimate of my own personal inflation rate. The more I thought about it, the more complex the problem seemed. If you were such a creature of habit that you always bought the same things in the same quantities every year, it would be easy, but my personal spending varies significantly from year to year.
It turns out the Dept. of Labor provides a lot of information about CPI and includes a number of calculators that allow you to look at your spending profile in your region of the country.
US Dept. of Labor:
http://www.bls.gov/cpi/
CPI is developed using goods and services data collected throughout the month from 87 different urban areas throughout the country and from about 23,000 retail and service establishments. Data on rents are collected from about 50,000 landlords or tenants.
The weight for an item is derived from reported expenditures on that item as estimated by the Consumer Expenditure Survey.
The web site discusses why you might experience a very different inflation index: The Consumer Price Index--Why the Published Averages Don't Always Match An Individual's Inflation Experience
http://www.bls.gov/cpi/cpifact5.htm
I decided to look at how the CPI basket of goods and services compared to the salaryguru's experience last year. Here's the results
....................................Relative Importance
.....................................CPI-U
....................................average......salaryguru
Expenditure category.(Dec.2001)......family
------------------------------------------------------------
Total (all items)............100.0...........100.0
Food and beverages.....15.7.............8.3
Housing.........................40.9............34.4
Apparel...........................4.4.............1.3
Transportation..............17.1............17.7
Medical care....................5.8............12.1
Recreation.......................6.0............15.0
Education .......................5.8.............1.7
Other goods & services...4.3.............9.4
------------------------------------------------------------
Total, all items...............100.0...........100.0
The online tools allow you to look at the measured inflation of each expenditure category in each survey area. In theory, that would allow you to get a pretty good estimate of your own personal inflation rate. I haven't gone through that effort yet.
