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If you do a quick Google search, you’ll find multiple organizations trying to help individual consumers make better use of the data provided by the CPI. One example is the Federal Reserve Bank of Atlanta’s . The tool asks users a series of questions and uses information—including gender, education level, age and income level—to provide consumers with a better idea of how prices are changing for people with similar lifestyles and spending habits. It combines data from the BLS and the Consumer Expenditures Survey. Another helpful measure of inflation is the (EPI), which the American Institute for Economic Research started providing in 2012. The EPI includes many of the components in the CPI, but excludes fixed expenses that stem from contractual agreements, like rent and goods and services that aren’t purchased on a frequent basis, such as cars. It’s purpose: Track the changing prices of necessities that consumers routinely purchase. “We wanted to create this measurement of what people see and feel every day,” says Robert Hughes, senior research fellow at the American Institute for Economic Research. Calculating your personal inflation rate
Fluctuating prices of items such as food and personal care products make budgeting difficult. It’s much easier when you can use a tool like the EPI to look at price levels for the products you often find yourself buying. If you wanted an even closer look at your household’s spending patterns, there are tools available to help. One example is a developed by financial solutions provider . Enter your expenses, including medical care costs and housing costs, and you’ll see how your personal inflation rate compares to CPI data released annually in May. Faculty at the College of Management at the University of Massachusetts Boston have developed a series of calculators, including one that can measure your personal inflation rate. Households can see their individual and weighted inflation rate, which reveals how their personal expenditures have changed over time in relation to changes in their income levels. Making sense of the data
You might be surprised by how your own inflation rate compares to the national average. At the very least, you’ll get a better sense of how well you’re keeping up with your budget. Once you know how much you spend on certain items, it becomes much easier to save money. You’ll have a much better idea of whether you can make adjustments and put more money in a or . Then you can recreate your budget based on your financial goals and priorities, says Danny Michael, founder of , a fee-only financial planning firm in Los Angeles. “Once it’s categorized, then you know which expenses you can’t eliminate and you need to live,” Michael says. “But then these are other expenses that could be eliminated or could be reduced.” SHARE: Amanda Dixon Related Articles