How to calculate your own personal inflation rate

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The scale of the cost of living crisis was revealed again this week as official figures revealed inflation jumped 10.1% – another 40-year high – during the year until July 2022. Food prices are largely responsible for the latest rise.

The economic shock comes ahead of the entry into force of a new energy price cap in October, which could leave households facing annual bills of almost £3,600 for their gas and electricity. Here’s the lowdown on how this affects inflation.

The preferred measure for calculating the rate of inflation in the UK – the Consumer Price Index (CPI) – reflects what the Office for National Statistics (ONS) calls the change in the total cost of the ‘average basket’ of goods and services.

This basket contains approximately 700 goods and services, including various food items and beverages to water, gas and electricity. But if you don’t buy or use some of the goods and services included, your own “personal” inflation figure may be very different.

For example, fuel prices jumped 43.7% in the year to July. So if you drive a lot to school or work, you might feel like the overall 10.1% figure is underestimating your own cost of living crisis.

Each household will be unique, so your own personal inflation could be very different from the overall figures. Here’s what your true inflation will likely look like, including how to calculate yours.

Inflation hit a new 40-year high this week, a rise fueled by food prices

What fueled inflation?

Energy bills are the biggest concern for households, but it won’t be known how much bigger they will get until August 26, when the next price cap is announced.

In July, however, grocery bills fueled inflation: prices for food and non-alcoholic beverages alone rose 12.7% over the past year.

Rising milk, dairy, pasta and oil prices drove the increase, while take-out prices rose 10.3%. Even pet products jumped 13.7%.

This is not only due to global supply problems – of wheat, for example – following the Russian invasion of Ukraine, but also to the pressure exerted on farmers who are struggling with shortages. personnel and rising input costs. Here’s more on why inflation is on the rise.

So how can I calculate my own personal inflation?

Your own inflation will depend on your personal situation, for example if you have a mortgage or a fixed rate energy contract – whether you are a smoker, choose certain brands in the supermarket, live alone or have a family dependent.

Food inflation is currently dominating price increases, but if you’ve replaced with cheaper alternatives and are only buying what’s on offer, your food inflation rate will be lower.

Calculating your personal inflation rate starts with tracking your expenses.

If you have a spreadsheet or have written down a budget, that will help immensely. Alternatively, there are spreadsheets you can download online or you can use Excel to help you figure out what you’re spending and where.

Next, you need to enter your total expenses, which can be used to calculate the percentage change over the past year.

So, for example, if you spent £578 in July 2021 and £650 in July 2022, that’s an extra £72 spend. This means that your overall inflation is around 12.5%.

To refine the calculation, you can remove any one-time expenses, such as the following expenses, to get a better indication of how inflation affects you:

  • A new car
  • A marriage
  • White goods and furniture
  • Any debt you had to repay

Here are some workable examples.

single adult

Jennifer lives alone. His essential monthly expenses based on what the ONS takes into account are as follows:

Food and drink Energy bills Train fares Eat outside Holidays/outings Housing costs Fuel Bus fares Childcare costs Clothes and shoes
£55 £70* £100 £70 £50 £800* £0 £0 £0 £40
*Fixed rate **For a mortgage at a fixed rate of 1.75% over two years

Jennifer should assess her spending – and how it has been affected by rising prices – against another measure of inflation: the consumer price index including housing costs (HICP), which examines how much it would cost someone to rent the house they live in or own, and also takes council tax into account.

Results: Jennifer’s spending in July was £172 more than it was in July 2021. Energy accounted for 16.7% of that figure.

Jennifer’s personal inflation figure: 6.2%. This rate is lower than the CPIH’s official rate for the year ending in July, published this week, which stood at 8.8%.

family of five

Meanwhile, father-of-three Thomas spends the following each month:

Food and drink Energy bills Train fares Eat outside Holidays/outings Housing costs Fuel Bus fares Childcare costs Clothes and shoes
£420 £210* £200 £120 £250 £1,100** £200 £70 £600 £150
* Standard variable rate ** Rent

Results: Thomas’ spending has increased by £414 year-on-year. Energy accounted for 20.9% of this figure.

Thomas’ personal inflation figure: 8.9%. That’s higher than the CPIH’s official rate for the year through July, which was 8.8%.

A couple

Katie and Sam, first-time buyers, recently purchased their own apartment. Their essential monthly expenses based on what the ONS takes into account, are as follows:

Food and drink Energy bills Train fares Eat outside Holidays/outings Housing costs Fuel Bus fares Childcare costs Clothes and shoes
£125 £190* £250 £210 £200 £1,150** £140 £0 £0 £90
* Standard variable rate ** On a 2.3% fixed rate mortgage over two years

Results: In July, the couple’s spending was £325 more than it was in July 2021. Energy accounted for 24.1% of that figure.

Katie and Sam’s personal inflation figure: 8.6%. The CPIH’s official rate for the year to July was 8.8%.

sam and katie drinking habits
A breakdown of the couple’s spending increases over the past year

How can I calculate my own personal inflation figure?

You can use this useful calculator on the government’s inflation page to find out how increases in the cost of living have affected you over the past 12 months.

The calculator helps you see where you are spending more than the national average and how much less you can save compared to last year. You can then use this data to determine where to cut back.

It will ask you questions, such as how much you spend on food each month and if you drive, to help determine your figure.

What should I do with the results?

You should now have a good idea of ​​how your personal inflation compares to the overall numbers. So what to do with the data?

Knowing your own inflation rate is not just a curiosity. The result may be sobering, but it may also be the revelation you need.

Seeing where your budget is hit the hardest can help you figure out where to cut back.

For example, finding out that your grocery bill has increased by a certain amount per year might be the trigger you need to start shopping at different supermarkets.

Sure, there may be areas where you just can’t cut back, like childcare, but at least you can rebalance the scales by limiting your spending elsewhere.

Check out our pages on how to budget and beat inflation to learn more.

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