Personal Inflation Calculator

Published: March 11, 2017 at 9:48 am

The official inflation numbers, be it the consumer price index or the wholesale price index have little or no relation to how much our expenses increase each year. The main reason for this is because the cost of labour/services is not regulated or calibrated.  Here is a personal inflation calculator that can help you understand how much the expenses for essential needs have increased year on yearThis is the true benchmark for long-term (not short-term) financial goal planning, especially retirement.

I shall post the weekly Q/A tomorrow. Felt like posting this first.

The calculation is quite trivial and a “calculator” for this is a bit of an overkill. But many people seem to have trouble calculating it.

Personal Rate of Inflation = (current_expenses/past_expenses)^(1/years_elapsed) -1

The main reason for the difficulty being the ^(1/years_elapsed) – power function. Probably not as popular as +,-,*,/.

[CP_CALCULATED_FIELDS id=”7″]

If you want to calculate it for more years simultaneously, you can use this Excel sheet. Those who do not have Excel can upload this to Google Sheets. From there it can be exported to LibreOffice as well.

When/How to use

If you need to convince a friend not to buy or get rid of insurance policies, or if you want to convince them about investing in equity, this might be of some help.

Also when you want to set an inflation rate in your retirement calculations, check out a comprehensive online low-stress retirement calculator.

Excel version:  low-stress retirement calculator

Android app at Google play.

Actual inflation numbers can give you an idea of how much the cost of essential expenses has increased year upon year. If you wish to understand what exactly that means, please read more about What is Compounded Annual Growth Rate (CAGR)? Part I: Lump Sum Investing. The formula for inflation is just as the same as annualised return from a lump sum investment.

Download the Excel personal rate of inflation calculator

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps