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Real Inflation - A Few Calcs

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Just thinking - Essentials not in the inflation measure - Council tax, Energy bills etc..

On an average income of 22k, These costs must make up at least 10% of spending (2.2k - if not more).

Adding the rises - Council tax 5%, Tv license 4%, Energy bills 30% must all average around 11% rises for 10% of income.

If everything else rises wth the CPI, then 1/10 * 11% + 9/10 * 2.5% (RPI) = 3.4% real inflation.

Its just a rough calc - but points out that if you are a saver you are getting a real (after tax) return of 0.

Whats interesting is that if you are on a lower income, your inflation in the essentials is much higher -

Drop income to 11k and its 1/5 * 11% + 4/5 *2.5% (RPI) = 4.2% real inflation.

Then saving from annual income would be more or less a negative return even with the best accounts!

Obviously this has massive effects in terms of individual finance decisions. I for one would not be so critcial of people who take on debt.

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