|For 2015, I annualised the expenses plus another x amt to approximate the usually more spending that occurs towards the end of the year|
Wednesday, August 05, 2015
Lizardo here did a very interesting take on the inflation rate in Singapore. He found that based on the official recent 35 yrs of history (1980 to 2015), the average inflation rate is about 2.22% (or CAGR of 1.97% pa) . A longer period from 1962 to 2015 gives an average inflation rate of 2.75%.
I think the official figures might not mean much to you, because it depends on the price of a basket of goods that may or may not be relevant to you. Hence, the concept of personal inflation rate is much more relevant and customised for individual's taste and consumption patterns. To get a good proxy of my own personal inflation rate, I thought that we can compare how my expenses rose over the years. It's not the best way to calculate it, but it's fairly good approximation.
I had my first track record of my expenses back in 2008. Back then, I wanted to try tracking in detail for 1 month, or at most 2 months. But before long, 8 years had passed and I have a full record of my expenses from 2008 to 2015. Everything is included here, including parent's allowance, mortgage, daily expenses, etc. Here it is:
I highlighted 2011 to 2015 because that's the years in which I shifted from living in my parent's house to my own home with my wife. There's a huge jump in my expenses because there are a few financial bombs that exploded over that particular period between 2008 to 2010. There's a wedding (small bomb), there's a COV and renovation of flat, plus a first down payment (big big bomb) and there's a down payment for a second hand car (small bomb). All in all, the expenses are fairly huge but unlikely to occur again.
Thus, from 2008 to 2015, my expenses increases by an average of 6.9%. To remove the one-off cost of getting a flat and renovation, I also looked at the average increase from year 2011 to 2015, and it worked out to be 0.4%. How about CAGR? From 2008 to 2015, my CAGR is 5.71% pa, and from 2011 to 2015, my CAGR is 3.85% pa.
I think for all purposes in planning, I should use an inflation rate of 4% pa until I have more stable data of my expenses. No hurry.