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Personal Inflation Rate refers to the rate at which your individual cost of living increases over the years based on your spending habits.
While there is an official inflation rate used by the government for economic purposes, this rate is used when planning budget and managing personal finances.
Simply put, if the inflation is at 4%, but you have started spending more on takeouts, health supplements or subscriptions, your personal inflation rate will be higher.
To budget wisely and build wealth over the long run, you should be aware of this rate to set a plan more realistically for the future.
Start with calculating your personal inflation rate. List your expenses for two time periods (months/years) and calculate the percentage increase, overall and in every category.
Track your expenses regularly by making use of apps or excel sheets. See where you spend the most and which categories are inflating your cost of living the most.
As your income rises, avoid upgrading everything and changing your lifestyle completely. Instead of buying a better car just because you can, save and invest more.
Plan your budget better by eliminating unnecessary expenses. Review your auto-payments for any subscription you don’t use that often and cut it for bigger savings.
If your personal inflation rate was at 8% last year, aim to bring it down to 6%. Determine where you need to make changes and implement them.
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