Many people are beginning to feel the pinch as rising inflation has started to impact our overall cost of living. Gas prices have skyrocketed, the cost of food has soared and even 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.
Income
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 satellite TV 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 prices at different grocery stores 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 reduce our insurance costs, 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 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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