Why your personal inflation rate matters

The official inflation rate might not match your own experience. Here's why it's vital to track your personal cost of living.

- By Warren Ingram

The publication of the national inflation rate often sparks controversy because very few people experience the same increase in their cost of living as the national inflation rate indicates.

Some individuals even believe that these numbers are manipulated, and most feel that their cost of living is rising faster than the national averages. There may be instances where a country's inflation rate is miscalculated, but in most cases the issue arises from a lack of understanding rather than any conspiracy.

The national inflation rate is important to you. Still, you should strive to determine how your own cost of living changes each year because financial planning is based on your cost of living and the projected increases over your lifetime.

Why personal inflation rate may differ from the official inflation rate

The Consumer Price Index (CPI) is useful for tracking price changes over time for everyday items you buy, such as food, as well as rent, clothing and fuel. It provides a clear picture of whether the cost of living is rising (inflation) or falling (deflation).