# Personal Inflation Calculator

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 +,-,*,/.

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

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.

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