How to Calculate Your Personal Inflation Rate?

Characters:
Riya – A curious investor
Sharin – A friendly financial planner

Riya: Sharin, I feel like my expenses are rising faster than the inflation rate I see on the news. Is there a way to check my own inflation rate?

Sharin: Absolutely, Riya! You just need to compare your expenses over two financial years.

Riya: Financial year? You mean April to March?

Sharin: Exactly! Take your total spending from April 2023 to March 2024 and compare it to April 2022 to March 2023. Download your financial year bank statement in excel sheet to see the total credits and debits. Then take notice of the total debits in that financial year.

Riya: Okay, and then?

Sharin: Subtract the older year’s spending (total debits) from the newer year’s spending. Then divide the difference by the older year’s total.

Riya: Let me try—if I spent ₹10 lakh in 2022-23 and ₹11 lakh in 2023-24, that’s a ₹1 lakh increase. So, ₹1 lakh divided by ₹10 lakh?

Sharin: Yes! That gives you 0.10, or 10%. Multiply by 100, and your personal inflation rate is 10%.

Riya: Wow, this is simple! Now I can track how my expenses are really growing.

Sharin: Exactly! It helps you plan better and ensure your savings and investments keep up.

Riya: Thanks, Sharin! I’m going to check my numbers now.

Sharin: Great! Let me know if you need help. 😊