How to calculate your personal inflation rate in 2023

From higher food prices on grocery store shelves to soaring prices for airline tickets, the cost of everyday life has gotten more expensive  — 93 percent of U.S. adults have experienced higher prices over the past year, according to a Bankrate survey as of February 2022 polling.

Inflation impacts everyone differently, however. Below, we dive into how your individual spending habits may be affected by inflation. Learning how to calculate your own personal inflation rate can help you be better financially prepared in 2023.

Key Bankrate inflation statistics

How CPI inflation rates impact you: Latest insights

Inflation refers to the cost of goods and services increasing over a sustained period of time. The Consumer Price Index (CPI) percentage change for all items is up 6.4 percent from January 2022 to January 2023, according to the Bureau of Labor Statistics (BLS).

Rising inflation means that many of the average person’s expenses, from bills and utilities to groceries and gas, will rise, too. That’s why prices on goods like eggs may seem a lot more expensive than they did a year ago.

Though the national inflation rate is 6.4 percent, prices for different categories will vary. Groceries, which the CPI calls “food at home,” has risen 11.3 percent as of January, while the cost of apparel has only risen 3.1 percent, in comparison.

Inflation has been a source of worry for many over the past year, but it may not continue to rise in 2023 like it did in 2022. Inflation has fallen since the CPI reported a 10-year high of 9.1 percent in June 2022. Nearly half of economists polled by Bankrate say that inflation is likely to be as expected over the next 12-18 months, and only 15 percent think it will rise significantly more than expected.

Seeing everyday items grow more expensive is causing consumers to change their habits to make room in their budgets. Bankrate found in March 2022, before record inflation in summer 2022 and the resulting interest hikes, that 84 percent of those experiencing higher prices have taken at least one action as a result:

Source: Bankrate
Notes: Percentages are in reference to survey respondents who reported experiencing higher prices; Respondents could select multiple responses.

Your personal inflation rate in 2023: What costs are increasing?

The national inflation rate generally influences the average household’s spending, but a personal inflation rate is actually a better indicator of how your own expenses may have risen over the last year.

Your household expenses likely don’t perfectly match the average American’s, and depending on factors like the people in your household, your age and where you live, the St. Louis Fed explains your personal inflation rate will differ.

“If the inflation rate is, let’s say, 2 percent at the national level, that does not necessarily mean that for your individual household the expenditures may have changed by 2 percent,” Arindam Bandopadhyaya, an interim dean and professor of finance at the University of Massachusetts Boston, said. “It may have been more than that or less than that.”

These figures differ in part due to people spending their money differently. Different goods have risen in price more than others over the past year. For example, cereal, bread, rice and other grains rose in price 15.6 percent between January 2022 and January 2023. However, if your grocery budget typically includes more meat and eggs instead, you would see a smaller increase, since that category’s price only rose 8.1 percent year-over-year.

This is how common household purchases have risen year-over-year:

Bankrate’s analysis: Price climbs for common purchases

Grocery

Transportation

Home bills

Discretionary spending

Airline tickets have seen some of the highest increases over the last year, with tickets selling for 25.6 percent higher in January 2023 than the year previously. But other goods related to energy and transportation, such as household energy bills, delivery services and public transportation have also risen in double-digit percentages (15.6 percent, 14.3 percent and 17.1 percent, respectively) year-over-year.

The cost of cereals and grains have risen more than any other grocery item (15.6 percent year-over-year), in part due to shortages of grain since the Russian invasion of Ukraine last year. Grain is a major Ukraine export, and backlogs are still significant, according to the European Union.

How to calculate your personal inflation rate

To start, you can find an idea of your personal inflation rate by looking at your typical expenses by category — such as housing, utilities, food and clothing — over the last year. Comparing those to the BLS’ categories, some of which are listed above, will give you a start on knowing how much those prices have increased and how much your typical purchases and expenses have risen in price due to inflation.

An online calculator can also allow you to plug in your expenses for more precise information.

Suppose you don’t have easy access to your spending over the past year. In that case, you can check out the Federal Reserve Bank of Atlanta’s personal inflation calculator, which looks at your age, household size, where you live, income and other factors to show how much more you are paying for expenses than last year.

For example, a 30-year-old man renting alone with a high school education and making $50,000 a year is expected to have a higher CPI (7.5 percent) than the national average (6.5 percent), according to the Fed’s calculations.

In comparison, a 45-year-old woman who owns her home and lives with a spouse and two children, making over $70,000 a year and with a college degree, is expected to have a very similar CPI (6.9 percent) to the national average.

Making sense of your personal inflation rate: Next steps

Knowing how your expenses have risen is only the first step in taking control of your budget. Consider these next steps:

Edit your budget. If your grocery budget, for example, no longer seems feasible due to the rising cost of items, don’t be afraid to edit it to a more realistic figure. Look at your bank statement to see how you have spent in the past months, and consider temporarily changing your budget to accurately reflect what you might spend amid inflation. Once you’ve adjusted your budget, try implementing cost-cutting measures to keep expenses like groceries down, like shopping at multiple stores for the best price or buying in bulk.

Adjust your goals. If your budget has changed due to rising cost of items, you may want to adjust your financial goals, such as saving for a summer vacation or saving $1,000 per month. Consider smaller or more attainable goals, like a road trip instead of a vacation that will require an expensive flight. Or, consider a $500 savings goal per month, which may be more reasonable to meet. It can be difficult to save during an uncertain economy, and it may take longer to reach certain goals, but every step brings you closer to where you want to be.

Learn more:

• Take these 10 steps now after the Fed’s latest interest rate hike
• How much is higher inflation hurting you? Here’s how to estimate
• Here’s what the Fed’s fastest rate hikes in 40 years mean for your money

• • Methodology

    Bankrate.com commissioned YouGov Plc to conduct the survey on higher prices. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,386 adults. Fieldwork was undertaken between 9th – 11th February 2022. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
    
    
    The Fourth-Quarter 2022 Bankrate Economic Indicator Survey of economists was conducted Dec. 12-19. Survey requests were emailed to economists nationwide, and responses were submitted voluntarily online. Responding were: Ryan Sweet, chief economist, Oxford Economics; Yelena Maleyev, economist, KPMG LLP; Odeta Kushi, deputy chief economist, First American Financial Corporation; Lawrence Yun, chief economist, National Association of Realtors; Scott Anderson, executive vice president and chief economist, Bank of the West; Bernard Markstein, president and chief economist, Markstein Advisors; Mike Englund, chief economist, Action Economics; John E. Silvia, founder and president, Dynamic Economic Strategies; Robert Frick, corporate economist, Navy Federal Credit Union; Dante DeAntonio, director of economic research, Moody’s Analytics; Nayantara Hensel, PhD, senior economic advisor, Seaborne Defense LLC; Gregory Daco, chief economist, EY; and Bill Dunkelberg, chief economist, National Federation of Independent Businesses.
    
    
    Bankrate.com commissioned YouGov Plc to conduct the survey on pay raises amid inflation. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,458 adults. Fieldwork was undertaken between August 17-19, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.