How to do your own inflation calculation

 

The monthly inflation figure is essential in gauging how the nation is doing but it’s largely irrelevant to individuals.

That’s because the basket of goods the Office of National Statisticsmeasures to monitor prices is a general one. What are the chances ofthethings you spend your money onmatching the items in the official basket? Practically zero.

So when you read that inflation has fallen, but you’ve noticed your cost of living has climbed, there’s noneed to be puzzled. It’s just the levelling-out effect of the statistics. There are almost certainly millions of others who feel the same.

If you read the Twilight series of books on your iPad, then the inflation basket may from now on more closely match your spending patterns. But if you’re just about to splash out on a new casserole dish or a step ladder, the official stats are going to move even further away from your experience.

There’s a simple way to calculate how inflation is hitting your finances. Get hold of a bank statement from a year ago and compare itto today. Look at the things you have to splash out for every month – travel costs, energy bills, phone, broadband, food and so on – and add up how much you spent then and how much now.

Work out the difference as a percentage of last year’s figure to get a rough idea of how much inflation really is ravaging yourfinances.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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