Inflation was reported at 8.3% today. You probably think that means your life is 8.3% more expensive than August 2021.
But it ain’t.
Here’s why…(and other fun facts).
1. The Consumer Price Index is broadly broken down to:
– Food
– Energy
– Everything else (including housing – aka shelter)
2. Shelter is ~30% of the Consumer Price Index
Shelter is measured as both rents and Owner Equivalent Rent. In other words, what you would pay if you rented your home instead of owning it.
But if you already own your home and locked in your mortgage while the getting was good, then you’re not really feeling the Shelter bump.
(Cup is half full: If you own, CPI is knocked down to under 6%.)
3. Energy is the worst of the bunch up 23.8%
And gasoline, in particular, is up 25.6%! Eek!
But – and TBH I have no stats for this – how much have we driven this year? Weren’t most of our fuel costs from our daily commute which still isn’t happening?
We have pricing anchors to how much it used to cost to fill up. And that’s a lot more.
But most of us don’t have any frequency anchors to how often we filled up, which is a lot less.
(Cup is half full: the gasoline index is down 18% since July.)
4. Food is where you’re actually feeling it.
The “food at home” category is up 13.5% over the last 12 months and “food away from home” is up 8% year-over-year.
We’re all still eating and we all have pricing anchors to what food used to cost.
So we’re both feeling it mentally and in our wallets.
(Cup is half full: Food costs are only 10% of the average monthly budget.)
In conclusion
Don’t let the headline numbers steer you in the wrong mental direction.
I’ve found the key to navigating “tough times” is to look at facts, not headlines – or God forbid – talking heads’ opinions.
Life is DEFINITELY more expensive than it used to be, but not nearly as much as the media wants you to believe.
(Unless, of course, you’re feeding adolescent boys. In that case, you have our collective sympathy.)
