Government inflation is not necessarily your inflation: Part II

Once again we see that the government’s definition of inflation is likely not your definition of inflation. I’ve written about this before.

With new CPI data coming out, it’s important that you stay informed about how the CPI relates or doesn’t relate to your real-life cash flow.

For folks accumulating wealth while working, or preserving wealth while in retirement, inflation is an incredibly important consideration.

The following two charts show some interesting things:

  • Core CPI seems modest. Core CPI doesn’t always match with our real-life expenditures.
  • Energy over the past three years has been one of the largest influences on inflation. This matters to both retirees and accumulators, but accumulators tend to get hurt more by energy prices due to travel for work.
  • For retirees, medical costs have far exceeded inflation.
  • For accumulators, college costs have far exceeded inflation.

Sensitivity to where you spend is important because relying on CPI data can hurt your projections if a large portion of your family expenditures are tied to energy or medical costs.

Sources:, St. Louis Fed.

Michael Dubis is a fee-only certified financial planner and president of Michael A. Dubis Financial Planning, LLC. He is also an adjunct lecturer at the University of Wisconsin Business School James A. Graaskamp Center for Real Estate. Mike can be reached at

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