My Personal Rate Of Inflation

Many people are beginning to feel the pinch as rising inflation has started to impact our overall cost of living.  We have high gas prices, the cost of food has soared and even auto insurance rates are starting to increase, leaving consumers wondering if inflation is getting out of control.

One of the benefits of creating and sticking to a budget is that you can analyze data from previous years and identify the expense categories that have been increasing.  I thought it would be interesting to compare the first 4 months of this year with the same time last year to determine my personal rate of inflation.


We are a single income family now with my wife staying at home full time to look after our daughter.  Last year my wife was still receiving maternity leave benefits (until mid-March), so we didn’t have that income to count on this year.  Meanwhile, my salary increased by 4.4% year-over-year after receiving an annual raise last July.

Net Income = plus 1.5%

Energy Costs

Our energy costs consist of our electricity bill, natural gas bill and water bill.  Our electricity provider charges a fixed rate of $0.07/kwh, while we pay a floating rate for natural gas at around $3.50/GJ (compared to the fixed rate of $6.59/GJ).  Our energy costs are fairly cheap, but likely due to a colder winter our consumption has increased year-over-year.

Net Energy Costs = plus 6.7%

Other Utility Costs

Since we cancelled our landline, our other utility costs consist of my wife’s cell phone bill, our cable bill and our home internet bill.  One thing I find interesting about these utilities is that as a shareholder of Telus, Shaw and BCE I really enjoy it when they increase their dividends, however I notice that the next month my bills have all increased by the same percentage.  All three of these companies increased their dividend in the past 12 months and our utility costs have risen right along with them.

Net Other Utility Costs = plus 4.4%

Grocery Costs

This is the big one where consumers are starting to feel the effects of rising inflation.  Of course, there are things you can do as a family to help lessen the impact on your wallet.  Our family creates a meal plan every month that keeps us on track and helps us to avoid impulse spending, and we also make sure to compare grocery store prices to maximize our value for money spent.

Our grocery costs include baby expenses and cleaning supplies.  Overall I was surprised to see that our grocery costs only increased at a normal rate of inflation.

Net Grocery Costs = plus 2.0%

Fuel Costs

Gas Prices have been soaring this year.  Compared to the same time last year, the prices at the pump have increased by about 30%.  I don’t typically concern myself with the cost of gas since I live in a small city and have a very short commute to and from work.  Fuel costs make up approximately 1.5% of our gross income.

After reviewing this expense perhaps I should change my attitude.  Our fuel costs almost doubled from the same time last year!  The cause of this is difficult to pinpoint.  We redeem our Air Miles for gas gift certificates and could have had a large redemption last year.

We might have taken a couple of extra trips up to Calgary earlier this year.  Either way, I’m going to keep an eye on this category to make sure it’s not becoming a trend.

Net Fuel Costs = up 82.1%

Insurance Costs

Many Canadians have reported that their home and auto insurance premiums have increased considerably in the last year.  Luckily we haven’t seen this in our case.

Every year I call our insurance company and try to find ways to save on auto insurance, and last year we managed to lower our auto insurance premiums by over 25%.  I haven’t made that phone call yet this year, but since we are moving into a new house later this summer we will need a new home insurance policy and I’ll try my luck then.

Net Insurance Costs = minus 27.4%

Tax Expense

Our tax situation has changed considerably now that my wife is staying at home and we have a child.  I feel like single income families are taxed unfairly (ok, I’m a little biased) and we should have the ability to be taxed as a family rather than as one income earner.  However, there are a few tax breaks that we can claim and our overall tax burden has decreased this year.

Net Tax Expense = minus 10.8%

My Personal Rate of Inflation

Everyone’s situation is unique and it is difficult to determine if inflation is truly impacting your personal budget or if certain circumstances have led to an increase (or decrease) in expenses.

With our net tax expenses reduced, our overall personal rate of inflation has actually decreased by 3.6% so far this year.  Without the tax expenses included (a more accurate measure of spending), our personal rate of inflation has decreased by $14 or 0.01%.

Have you determined how much inflation is impacting your overall cost of living expenses?

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  1. Financial Samurai on May 4, 2011 at 12:36 am

    Gotta love it when you pay less taxes!

  2. schultzter on May 4, 2011 at 6:41 am

    I did this exercise many years ago, when I was single and all my expenses fit into a half dozen lines.

    Now that I’ve got a family, gone through mid-year supplier changes, etc. I’ve looked at my ever growing list of expenses and thought “ugh, maybe next year.”

    The fuel cost increase is scary though! We had to replace one of our cars last year and decided to go with a real family car – which meant bigger engine. Then the gas prices shot up!!!

    • Echo on May 4, 2011 at 11:02 am

      My spreadsheet was a bit cumbersome to put together but now it’s pretty easy for me to maintain, I spend maybe 15 minutes a week updating it.

      As for the fuel costs, you’re right it is scary. We have an SUV that’s not too bad on gas, but we’re definitely thinking about changing our long trip driving habits this summer.

  3. youngandthrifty on May 4, 2011 at 11:41 am

    I was just thinking about this yesterday as I fueled up my little civic. It cost me $50 to fill up! Definitely a budget buster. I wish the BC government took the tax off when the gas prices go up too high (like set conditions on it), but guess they didn’t think of that.

    Good that you’re paying less tax 🙂 but then there’s less income too 🙁

    • Echo on May 4, 2011 at 7:27 pm

      The Alberta Gov’t had something like that in place when natural gas prices went really high. Nothing for the pumps though. Gas prices in BC are crazy!

      And yes, I’m happy with the tax savings…not so much with the income, but hopefully that will change soon.

    • Maggie@SquarePennies on May 8, 2011 at 3:16 pm

      youngandthrifty, you are smart to have a civic for efficiency. We have a VW Golf that we use whenever possible. It gets between 42 and 50 mpg depending on conditions. Our other vehicle, a Sprinter van, gets as much as 42 mpg on trips. When we shop for cars the fuel efficiency is high on our list.

      Echo, congrats on beating back inflation so far. We keep looking for ways to cut down our heating/cooling bills with insulation, usage, etc. It really helps. Congratuations on cooking at home, too. That makes a huge difference & you will be healthier also. I’m sure you know about making your own baby food–cheaper & healthier too! Good luck to you in this battle with inflation that we all have!

      • Echo on May 8, 2011 at 3:24 pm

        Thanks for the encouragement, we’ll see how the rest of the year shapes up. I’m hoping that with the move to our new house we will have higher quality windows and it will be better insulated and more energy efficient than our house now.

        Cooking at home has definitely made the biggest impact on our savings and our health.

        Thanks for stopping by!

  4. My Own Advisor on May 4, 2011 at 6:33 pm

    Seems we’re all thinking about this, as your post was very timely. I haven’t done the math recently but I’ve certainly felt the pinches.

    My wife and I are trying to carpool more to reduce fuel costs and definitely not dining out as much to also make our income dollars go farther.

    My car insurance decreased this year and our home insurance also went down after we installed a security system. Mind you, there was a capital outlay for that.

    BTW – I wanted to send my sincere congratulations to you for being nominated by the Globe & Mail for one of the best personal finance blogs in this fine country. That is NO SMALL feat!!! Excellent work, you both should be very proud. Good luck with the selection process as the votes file in.

    I look forward to another year of posts, comments and interactions with you!


    • Echo on May 4, 2011 at 7:34 pm

      Thanks very much for your comments Mark, we are very honoured to be nominated for the Best of Blogs contest.

  5. Jessica07 on May 4, 2011 at 10:44 pm

    What a great post. I’ve never done this with my finances before. That’s going to change tonight. Thanks for the idea! 🙂

    • Echo on May 5, 2011 at 11:59 am

      Thanks Jessica, glad I can be a small inspiration for your finances 😉

  6. The Passive Income Earner on May 6, 2011 at 1:43 pm

    Nice post. I hear you about single family income being taxed unfairly. Especially with kids …

    Calculating the personal rate of inflation is a really good idea. I should look into mine to see if the inflation is more driven by our spending or external influences.

    Looks like you are doing really well in balancing where you can.

    • Echo on May 6, 2011 at 8:13 pm

      Thanks PIE, I never paid much attention before, but now that we are a single income family it really bugs me that our income can’t be taxed as household income.

  7. Leigh on May 6, 2011 at 2:21 pm

    That’s great that your personal rate of inflation is negative!

    As for tracking the cost of fuel, I have a non-wage income category that I put line items in for credit card dividends. So if I bought $30 worth of fuel with a gift card, I would put a zero transaction in my ledger with -30 going against the fuel category and +30 against the credit card dividends. That way, I can still track how much fuel costs me. I also note the price per gallon or litre in the memo so that I can look back at all of the fuel transactions and compare.

    I bought my car in early November and fuel prices have been increasing since then. My cheapest fill-up was on Boxing Day for $3.20/gallon and my last one in early April was $3.84/gallon. It looks like I will pay about $4.20/gallon tomorrow, which is a full $1 more per gallon from my cheapest fill-up!

    • Echo on May 6, 2011 at 8:18 pm

      Hi Leigh, thanks for stopping by. I was surprised to see my rate of inflation was negative but I have a feeling it will turn the wrong way over the course of a full year.

      That’s a really neat way to track your fuel expenses. I need to start doing that to include the gift cards that I use from redeeming my Air Miles.

      As for fuel prices, they are definitely on the rise but the price of oil just dipped back below $100 so maybe we’ll see a pull back soon. We can always hope…

  8. Colleen @ Toronto Debt on May 8, 2011 at 6:26 am

    My husband makes an hour long trek into work each day and then home again, we had an SUV, well, the cost to get to work and back, last time he used the SUV was about $25, we ended up purchasing an older Civic, which has greatly helped as it’s only now about $10 a day. I am always wondering when the gas prices will go back down, is that just wishful thinking?? :/

    • Echo on May 8, 2011 at 10:32 am

      The hour long one-way commutes definitely make it tough on the budget when gas prices climb. It helps to weigh the cost of driving vs. the cost of moving closer to work.

      • Colleen @ Toronto Debt on May 9, 2011 at 6:48 pm

        We actually lived a 5 minute drive from his work for his first 8 yrs there. We wanted to finally buy our first home with decent sized yard and couldn’t get anything we could afford being so close to a major city. We figured the drive was worth the change and size of home we get, that was before gas prices went up so high.

        It’s ok now with the Civic… $50 a week is manageable compared to the SUV!

  9. Country Girl on May 8, 2011 at 5:13 pm

    Great post! I know the biggest impact on my personal rate of inflation has been gas prices. Last week a full tank of gas cost me $57 – the most I’ve ever spent on fuel. Ouch. I could move closer to work, but the difference in taxes between town/country are still substantial enough that overall it’s cheaper to live outside of town.

  10. An Exacting Life on January 17, 2012 at 5:54 am

    I ran some figures for the calendar year 2011 and came up with an average increase of 8% at my house, but gas and home heating oil were both up by over 20%!

    • Echo on January 18, 2012 at 8:54 am

      @An Exacting Life – running the numbers like this is pretty eye-opening. Of course, consumption patterns are never equal from year-to-year, but it’s interesting to see the comparison.

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