Manage Your Retirement Nest Egg with Your Personal CPI

What is Your Personal CPI?

Regardless of the size of your nest egg, how fast your Personal CPI – cost of living increases grows can significantly affect your living standards over the long term. I say “your” cost of living because everyone has a different cost of living unique to their personal and family situation.

If you own your home and have no debts then it will be different to someone who rents or has a mortgage and maybe some credit card debt. They are more at the mercy of rising costs.

If you can create your personal CPI and then measure it each month you will be able to see what areas of your spending is most affected by CPI increases. Using this information you might be able to manage where you spend your money to minimise the CPI impact on your nest egg.

To help you try the MyInflationRate page showing Inflation Rankings. Use it to plan your purchases if you can buy in bulk or delay purchases to match the changes in inflation rates.

For instance a friend of mine just buys one type of shoe and always wears them. So when he saw them advertised for 50% off he raced to the shop and bought 10 pairs. He said they tend to last him a couple of years each pair, so 20 years should see him wearing his last pair for his final journey Sad smile

If you have an older TV or a microwave it might be better to update it before it fails. Not only that you might save on your electricity bill with an LED TV or a more modern microwave unit. We just purchased a Sony 1100W microwave for $129 reduced from $229 courtesy of Telstra my “friendly” telephone and Internet provider. And it included FREE delivery.

Get Help from The Following Web Sites:

MyInflationRate.com

MyInflationRate.com is a great web site with heaps of options and where you can really go to town creating your own index. You have to create a user login but don’t let that deter you. There is great information on the site.

Create Your Personal CPI

As you can see you can “drill down” each category and tick each item to really personalise your personal CPI.

If you then click on the category you will get a full page of information about that item’s inflations rate by year, YTD and there is even a chart for you to view.

Yet another page gives you CPI by Month for each year going back to 1913.

10 Year Inflation Rate Chart for Food Category

In that time the CPI has been manipulated by Governments to add/remove items and change categories. But you are only concerned with the future CPI and its affect on your Retirement Nest Egg’s purchasing power.

The last thing I want to mention is the Inflation Time Machine. If you haven’t realised the devastating affect inflation can have on your retirement funds then try putting in  $1.00 and 2011Enter the $ Amount, Year Now and Year Then and see how much a 1913 $1.00 paper money bill is worth today. Crying face

Spend time here to create your own personal Consumer Price Index and then use it to manage your spending and monitor the purchasing power of your retirement nest egg.

Kiplinder

At Kiplinder you will find a calculator that will enable you to create your own personal CPI index. You can then compareSample Personal CPI Calculator Results this to the official government index. Note however the government uses some “slight of hand” measure to manipulate the CPI. But since it aims to reduce the figure you should try to make sure you are below it.

BBC UK

Here is one from the BBC called the Personal Inflation Calculator that might suit some people. It breaks it up into monthly, annual and Housing Costs.

Peter Martin

Here is an interesting twist on the CPI where some people can benefit if their personal or group CPI is higher than the official CPI. In this example Pensioners will benefit:

If you thought the consumer price index measured the cost of living …

“It’s good news for pensioners, even if it appears to make no sense. Pensions and other benefits get lifted every six months by the larger of the official inflation rate and the pensioner and beneficiary living cost index.”

And he goes on to explain why the official CPI can be lower than personal or group CPIs. It is a good read.

If you can track your CPI and use it to delay or bring forward major purchases it mat help minimise the impact of the cost of living reducing your nest egg’s purchasing power over the long term.

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