2010 Inflation Predictions

The good news: inflation should remain tame this year. The bad news? The good news may not affect you personally, depending on what you spend your money on.

The way we define inflation in America is straightforward enough: the Bureau of Labor Statistics looks at price changes on a broad basket of consumer goods, weights them, then boils it all down to one nice, neat little number called the Consumer Price Index, or CPI. But unless you’re spending money on every component of that basket in the same proportions as the BLS assumes you are, your personal inflation rate may be entirely different from the national average.

Two takeaways from the news story above: 1. Inflation shouldn’t be a worry in 2010; 2. Unless you’re buying stuff that’s going up more than the inflation rate.

Once you understand a little more about the way the BLS computes the CPI, you’ll get a better handle on how inflation might affect you; and more important, what you can do to keep your personal inflation rate as low as possible. So let’s break it down.

The goods and services used to calculate the CPI are collected in 87 urban areas throughout the country from about 23,000 retail and service establishments. There are more than 200 products and services sampled, but they can be broken down into the following eight categories. Here they are, along with the weighting that each category receives in determining the final overall inflation number. (Note: they don’t quite add up to 100 because I rounded them.)

  • Food and BeveragesPercentage of CPI: 16% All manners of food and drink, including full service meals, snacks and alcoholic beverages. A little more than half of this total comes from food and beverages at home, a little less than half comes from price changes in restaurant meals.
  • Housing – Percentage of CPI: 40% About ¾ of this number comes from rent and owner’s equivalent rent. The rest is roughly divided equally between utilities and furnishings.
  • Apparel – Percentage of CPI: 4% Men’s shirts and sweaters, women’s dresses, shoes, jewelry. Women’s stuff is a bigger chunk than men’s. (Astounding!)
  • Transportation – Percentage of CPI: 17% Little bit gas, little bit maintenance, little bit car insurance, little bit air fares, but mostly new and used car prices.
  • Medical Care – Percentage of CPI: 6% Prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services.
  • Recreation – Percentage of CPI: 6% Television sets, cable television, pets and pet products, sports equipment, movie and theater admissions.
  • Education and Communication – Percentage of CPI: 6% About half is college-related, and the other half is postage, telephone services and computer stuff.
  • Other Goods and Services – Percentage of CPI: 4% Tobacco and smoking products, haircuts and other personal services, funeral expenses.

Now that you know more about how inflation is computed, let’s see if we can use this information to change (lower) our personal inflation rates.

Food (16%) There are hundreds of ways to save on food, from coupon sites to smart shopping tips. As for eating out, again there are plenty of ways to save. For example, eating an appetizer at home and splitting en entre out will cut your cost by 50%.

Housing (40%) A person who owns their own home isn’t affected by this at all. In fact, homeowners should really want this part of the index to skyrocket, since that would reflect higher home values. If you don’t own a home, now might be a great time to take the plunge. I’ve done plenty of stories that can help.

Clothing (4%) isn’t a very big component of CPI, but one could easily keep their costs down by buying on sale, buying used or using my method and simply not buying at all. (Virtually everything I wear I’ve received as Christmas presents, and I wear it until it either completely dissolves or my girlfriend takes it to Goodwill behind my back.)

Next to housing, transportation (17%) is the largest component of what we regard as inflation, and most of that is made up of how new cars escalate in price. Since buying a new car is pretty much a waste of money anyway, this part of the CPI could be addressed by buying used. And there are plenty of tips to lower your car costs.

As mentioned in the news story, medical expenses (6%) continue escalating, particularly for those of us who are self-employed. I’ve kept my costs down by getting a large deductible ($5,000), shopping my policy often, and doing what I can to support changes in our current disgraceful healthcare system.

Recreation costs (6%) are about as heavily weighted in CPI as medical costs. In this category, there are tons of ways to save, from negotiating a lower cable bill to using the library to fulfill some of your DVD and book needs.

As you also noted in the story above, rising education costs (6%) should be a huge concern for those financing a college education. But there are dozens of ways to soften the blow, from saving on textbooks (see my story on that) to college savings plans. Here are some stories about college savings.

Most of the “other” category (4%) concerns itself with toiletries (can you say “Sam’s Club?”) tobacco (you know what to do there) services like funerals (here’s a story about saving on that) and legal expenses, which you can also manage.

Bottom line? When you hear about inflation, tame or not, remember first that the overall number may not apply to you and even if it does, you can influence your personal inflation rate. A good reason to keep coming back for more smart shopping tips!

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
9 Purchases That Will Make You More Productive
9 Purchases That Will Make You More Productive

These Amazon products can give you an extra edge at work and other parts of your life.

7 Reasons You Should Change Careers After Age 50
7 Reasons You Should Change Careers After Age 50

Many older workers have the energy and experience to make a successful career change.

This Pastime Can Keep Your Brain Sharp as You Age
This Pastime Can Keep Your Brain Sharp as You Age

It’s never too late to benefit from taking up this type of activity.

13 Affordable Products for a Better Night’s Rest
13 Affordable Products for a Better Night’s Rest

These Amazon products can help you finally catch 40 winks — or more.

15 Things You Should Always Buy at Yard Sales
15 Things You Should Always Buy at Yard Sales

You can save a ton of money — especially if you spot any of these items.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.