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I am creating a spreadsheet to estimate future living costs. Is the Consumer Price Index the best measure of inflation? Is there any research you could point me to about the CPI, inflation, and forward estimates of purchasing value?
Last Updated: December 12, 2008
Information about the Consumer Price Index (CPI) can be found at www.bls.gov/CPI/. The CPI measures increases in the cost of a collection of commonly purchased items. While many experts believe the CPI does not accurately reflect the cost of living for all U.S. families, it is nonetheless the most widely used barometer of inflation. For example, the CPI is used as the basis for annual cost of living adjustments (COLAs) for Social Security. The CPI is probably the best indicator that you can use for your future value of money analyses, at least as a starting point. If you think that future inflation rates might differ from the CPI, you can always run alternative scenarios. Congratulations on taking the initiative to proactively plan for the future and help your family members with their finances.
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