You will build a simple sheet that compares the inflation in your own spending with the published figures.
Farah has now read the CPI release, compared headline with core, and sorted her price rises by cause. She still has one nagging question: what is her own inflation rate? Lesson 4.3 of How money works, Your personal inflation rate is not the headline number, showed the method on a single year of rough figures. This exercise turns it into a sheet you keep and update, built from prices you actually pay.
It takes about half an hour the first time. After that, updating it takes ten minutes whenever a new CPI release comes out. Farah's figures below are made up for the example.
Pull up twelve months of bank and card statements, plus any regular cash spending you can estimate. Sort the spending into the main CPI categories. You do not need all of the official ones. Five or six that cover most of your money are enough: housing, food, transport, healthcare and a catch-all for everything else work for most people. Add education or childcare if they are large for you.
Work out each category's share of your total spending. That share is your personal weight, the equivalent of the official weights from lesson 3.1, What the consumer price index measures and who publishes it, but for your household.
Farah's year came out like this: housing 40%, food 30%, transport 10%, healthcare 5% and everything else 15%. Rent dominates, which is common for someone renting a whole flat on her own.
In each category, pick a few things you buy again and again, and find what you paid for each a year ago and what you pay now. Old receipts, banking app histories, delivery app orders and your own memory all help. Aim for at least ten items across the sheet, with at least one in every category.
Work out the change for each item: the price now divided by the price a year ago, minus one.
Farah's list had eleven items:
Housing: rent, S$2,400 a month a year ago and S$2,520 now, up 5.0%. Food: chicken rice S$4.50 to S$5.00, up 11.1%; kopi S$1.40 to S$1.50, up 7.1%; ten eggs S$3.20 to S$3.40, up 6.3%; a 5kg bag of rice S$12.00 to S$12.50, up 4.2%; a bottle of cooking oil unchanged at S$6.00. Transport: an MRT trip S$1.50 to S$1.55, up 3.3%; a ride-hail trip to her parents' home S$18 to S$19, up 5.6%. Healthcare: a GP visit S$40 to S$42, up 5.0%. Everything else: her phone plan S$30 down to S$25 after she switched, down 16.7%; a haircut S$20 to S$22, up 10.0%.
For each category, take the average of its items. Food averages 5.7%, transport 4.4%, healthcare 5.0%, housing 5.0%, and everything else falls 3.3% because the cheaper phone plan outweighs the haircut.
Multiply each category's average price change by its personal weight, then add them up.
Housing contributes 40% of 5.0%, which is 2.0 points. Food contributes 30% of 5.73%, about 1.72. Transport adds 10% of 4.44%, about 0.44. Healthcare adds 5% of 5.0%, which is 0.25. Everything else takes away 15% of 3.33%, which is 0.5. The total is about 3.9%.
Now put the published figures beside it. In this example, say headline inflation for the same month was 2.5% and core was 2.0%. Farah's own rate was well above both. Most of the gap came from two lines: rent, which core leaves out altogether, and the hawker food she buys every day.
Treat the result as rough. A handful of items cannot match the thousands the Department of Statistics tracks, and averaging items equally within a category is a shortcut. Read the sheet for direction and rough size and ignore the decimals. If your rate is a point or two above the headline year after year, that is worth knowing when you work out the real return on your savings, as in lesson 4.2 of How money works, Real return is roughly the nominal return minus inflation.
The Department of Statistics publishes the CPI monthly, and you do not need to update that often. Set a calendar reminder for once a quarter, timed for a few days after a release. Each time, update the current prices, keep last year's column, and record the new headline and core figures next to your own.
Once a year, redo your weights from a fresh year of statements. Life changes such as moving home, buying a car or having a child shift them a lot.
One sheet. At the top, your categories, their weights, their average price change and their contribution, with your personal inflation rate in bold beside the latest headline and core figures. Below, the item list with old price, new price and change. At the bottom, the date of your next update.
Farah's first version showed that her cost of living was rising faster than the headline mostly because she rents. That is a fact she can plan around. Gather your statements and receipts, and build your own version with real prices.
Complete the personal inflation tracker with at least ten repeat purchases and compare your result with the latest headline and core figures.
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