Sunday, April 27, 2008

Personal Inflation - whats yours?

According to the wikipedia the definition of Inflation is "a rise in the general level of prices over time. It may also refer to a rise in the prices of a specific set of goods or services. In either case, it is measured as the percentage rate of change of a price index."

Inflation (to a certain degree) in general is useful for the economy as it forces spending and re-investing in the hope that prices will increase in the near future and helps one to lock down a price.

Inflation is one buzzword that one may be hearing a lot these days. The CPI (Consumer Price Index) or COLI (cost of living index) are some of the measures of inflation. COLI gives an estimated comparison between two regions and is useful when moving jobs or to different cities. Attached link provides one such comparison. Another example is CNNMoney's site.

How would you compare the inflation affecting you? One quick measure is comparing the grocery and other bills you paid vs. the one paid this year. Well, it really depends, can compare how much house prices and other things went up as well.
In general a rule of thumb would be to compare how much things that you require everyday went up. That would give you a sense of the net affect to you. Then there are indices - virtual which went up by a certain amount only if you counted them. One such example is housing cost. If you are not shifting to another house then the house price increases or decreases will not affect you directly.

I found such personal inflation calculators online as well. Taking into account one's personalized inflation one needs to observe that re-investing or salary increases are growing at atleast the same or better rate otherwise you are making a loss. vs a visual profit.

The main factor in inflation at least in the US is gasoline. So much depends on it. Often you will find just a single person driving a car unless of course one is making use of the HOV lanes. Public transport being such a scarcity people are forced using their automobiles. The real question is when will people seriously consider using the public transport more seriously and make their local cities think greener !