Adjusting the Budget for Inflation
April 7th, 2008 by Ana
Hubby and I had a little budget meeting Saturday (which was when I discovered the math errror and possible overdraft charges) and discussed where are money is going for the month. We raised two budgeting categories for the month of April: groceries and gasoline for the car and truck. Both of these budget items are growing and taking a bigger bite out of our monthly money.
It’s beginning to remind me of the 80s comedy-musical-movie Little Shop of Horrors (which hubby found online a couple weeks ago) and the alien carnivorous plant Audrey Two. At the beginning of the movie, Audrey Two is small and satisfied with only a few drops of blood from Seymour, but as it grows it demands more and more (and talks and sings as well). (Trivia: the original version of the movie starred a very young Jack Nicholson and was supposed to be a serious horror movie.)
Back to the budget - the grocery and gasoline allocations are starting to grow. With gas locally at $3.219 per gallon yesterday, it is taking about $50-60 per week for hubby to fill his truck (resisting the urge to make a snide remark about how we should have sold it…) and $29-34 to fill my Pizza Taxi per week. This is up from $45-55 for hubby’s truck and $26-31 per week for my car just a few months ago, and WAY up from last year. It is almost as if the vehicles’ gas tanks and the gas pumps are whining “Feeeeed me, Seymour!”
As for food, I have upped the amount to $140 per person in the grocery section of the budget, from about $120 per person at the beginning of the year. There is no imagining things, both hubby and son DO come up to me every late afternoon or early evening and say “Feeeeed me, Seymour!” in a voice mimicking the plant in the movie. It’s humorous, but I can’t help but wonder if I’ll have to prick a finger to accomplish this at some point.
Now, to get a bit political: you won’t see anything about this from any official government report. They intentionally strip out food and energy prices from their inflation calculations, which means the Fed will feel it is still safe to cut the interest rates because they can claim “inflation is under control right now.” All I can say is 8 of the 10 members of the FOMC must not eat or drive anywhere if they can say inflation is under control with a straight face.
Other countries’ central banks are raising the interest rates and watching (accurate) inflation numbers with concern (Aussie example here). So, why can’t our Fed do the same? Ben Bernake testified last week that a recession is a possibility, and last time I checked, recession + inflation = STAGFLATION. What in the world are our “financial leaders” trying to do to us?? Everyone on the FOMC is old enough to remember the 70s and how ugly that was … so why is it beginning to look like they are intentionally trying to bring back stagflation?
For another movie reference, I am reminded of the scene at the drive-in about the middle of the movie Twister. One of the storm chasers hops out of the van after checking the weather radar on the laptop, screaming “It’s coming right for us!” The hero of the movie grimly announces: “No, it’s already here!” as the storm begins to take apart the drive-in’s movie screen. I’ve been grumbling recently about inflation coming, and this month’s budget numbers seem to suggest: IT’S HERE ALREADY! In this house, we’re feeling it at the gas pump and in the grocery store checkout.
How about y’all: Are any of you feeling the effects of inflation in your budget? Is there a budget category that’s whining “Feeeeeed me, Seymour!” for you? Do you think the government’s official inflation figures are wrong? Do you feel like we are headed into some ugly stagflation? Or do you think I am being too much of an alarmist?
Posted in budgeting |
April 7th, 2008 at 10:41 am
You are not over-reacting. Here in Texas we have seen substantial jumps in the price of gasoline and groceries, just like everyone else in the country is. Since virtually everything in America travels on a diesel truck, we expect to see across the board price jumps on just about everything that can be bought in a store.
The FED is only making matters worse by cutting interest rates which devalues the dollar and stokes the flames of inflation. This also hurts folks on fixed incomes who rely on the interest thrown off by their retirement savings to get by.
From everything I’ve seen over the past 3 weeks, the FED and the Republicrats, (What? You thought we had a 2-party system?), seem only to concerned with bailing out Wall Street investment bankers, homebuilders, and other associated members of the ROBBER BARON CLASS in this country. Frankly, I don’t think they should be bailing out *anyone* with taxpayer dollars.
Some will object that if Bear Sterns and others like them are allowed to fail, we’ll see a repeat of the Great Depression. Perhaps….and perhaps not. I think that specter of depression was peddled to cover up the fact that the FED bailed out Bear because it was loose FED fiscal policy under Greenspan that created the housing bubble and got the financial system in the mess it is in now. Now the FED is just trying to cover their a** and the taxpayers get to foot the bill!
What a country!
April 7th, 2008 at 1:46 pm
We are definitely feeling the pinch at the gas pump and grocery store checkout. We are also feeling it in the lack of overtime for my husband. That is the one that really hurts the worst.
April 7th, 2008 at 1:56 pm
“What in the world are our “financial leaders” trying to do to us?”
Answer: bailout rich banks that made poor investment choices (sub prime mortgages) and people who made poor buying choices. As a conservative, it pains me to say it, but its true. These rate cuts are hurting the average person much more than they are doing any good.
April 7th, 2008 at 2:10 pm
Well, I am so sorry to hear about the problems you all face in your country. Inflation and recession are not something to kid with unfortunately.
In Romania, 19 years ago (when we had that Revolution) a “normal” wage was something like 2000 lei. Lei is our currency. After the revolution we had such a HUGE inflation that the wages got more numbers while our tiny leu was getting weaker.
Now, the wages are 10 million lei (some that are considered “ok”) and that means 300 something dollars. 20 years ago the leu was something like 1 dollar 3 lei or similar .. not so sure, but way stronger.
Now, so that we don’t kill ourselves counting the money, they’ve introduced RON (the romanian new leu) that’s 10 thousand times “smaller” (as numbers) than the previous currency.
Now we have 1000 RON wages and they are 300 something dollars.
You can imagine people are still not able to count the new money (cut back 4 zeros from the previous numbers) and the prices are SAME as you have there. I’d assume some are bigger.
I don’t wish you something like this, it’s been hell for us to be able to live off such small wages, while the currency was getting so “small”. Imagine living from 300 dollars a month and you’ll understand our tragedy.
BTW: my small 3 room apartment (56 square meters) is 80 thousand euros. (this is something like 120 thousand dollars). And still some of our people get into debt for 3 lives so that they can have apartments.
I wish you all a short recession with as little problems as possible. I read in the news about the problems you all face and it just brings back horrible memories.
Hugs
April 7th, 2008 at 5:01 pm
Ana, just be glad you live somewhere relatively small and low-cost. Here in Chicago, it costs my husband and me on ~$120 for groceries for ONE week. I WISH we were spending $140/month per person.
April 7th, 2008 at 6:08 pm
I agree with what you saying, in particular it does seem to be a harder to balance the budget. The US is such a powerful economic powerhouse, that we Aussies watch you very closely. We have a saying that when the US catches a cold, we get the flu! Our interest rates are increasing and whether that is a good thing, is all dependant on what side of the fence you are sitting. If you are a home owner with a large mortgage, it hurts a lot when interest rates increase. Of course if you are relying on income from your savings, it hurts. I found it very interesting that the US doesn’t include energy or food prices in the official inflation figures. I actually think we might also use smoke and mirrors with our figures. Our Reserve Bank looks at two inflation rates, headline and underlying. Underlying excludes the volatile items, which can ignore petrol and some food items (e.g. floods caused price increases). Our Reserve Bank tends to take the underlying rate more seriously than headline. Our inflation rate also includes electronic items such as plasma TVs which have decreased in value. Our underlying inflation figure is around 3.9% at the moment. I believe that if we excluded items such as electronic, ours would also be a lot higher (who is buying a plasma TV on a regular basis!). In the real world, it is the everyday items that count, such as food, petrol and housing. Perhaps our figures are a bit more accurate in determining the inflation rate, but it is certainly not perfect. Josie
April 7th, 2008 at 7:34 pm
I’m seeing it too, especially in the gas category. When my family and I started the Total Money Makeover in January 2007, we spent ~ $90-100/month on gas (I tracked actual expenditures). Of course, gas had dropped somewhat from its prior post-Katrina high points by then, most especially in the run-up to the 2006 Congressional elections when, mysteriously enough, the price of gas dropped from $2.89/gal back to about $2.19/gal. But by summer they drifted back up and we were paying about $145/month. Now we’re budgeting $180 to $200/month and actually end up spending around $160 to $175. So the difference is quite noticeable. And we have not changed our driving habits much, nor our cars. So this is pretty much an apples to apples comparison.
I love your line that the Fed officers must not eat or drive. Unfortunately that seems to be true of a lot of decision makers these days.
April 7th, 2008 at 8:01 pm
We may have to do that. Right now I’m just hoping we can compensate by frugaling the food a bit.
April 8th, 2008 at 2:22 am
I am feeling it in gas… here in Seattle regular (87) gas is $3.49/gallon. Diesel is above $4. KAHvfjshfs AGH.
Fortunately, I drive only about 75 miles a week, if that (working at home is lovely), and Sean has a company gas card and so pays for NO gas (lucky), but my poor sister who works, lives, and schools at all different ends of the greater Seattle area is spending hundreds in gas a month. If nothing else, SHE is feeling it hard :/
April 8th, 2008 at 2:45 am
I am from the UK and we are feeling the effects here. Petrol seem to have gone up in price every time we go to fill up - we are thankful that we have a hybrid car so at least we get a good MPG. I was very surprised to notice that out grocery budget was the same as it was about 7 years ago and we now have two children. However, because I am cooking for the children I buy less ready meals and take aways and we eat out far less often, I also search for bargains in the supermarket. This has of course made a huge difference.
April 8th, 2008 at 4:34 am
Some grocery prices are up 50%, no kidding. Bought olive oil at the commissary for $10 last month and just saw the same bottle, on the same shelf, is $15.
At Trader Joe’s, kids’ multivitamins were $1.99 and now are $2.99, the Trader Joe’s yogurt is up 75 cents as well… we are feeling the pinch in our budget and have no wiggle room.
April 8th, 2008 at 5:00 am
Yup, I got a surprise when I did my grocery budget for April based on March’s reciepts, too! My bf thought it was me but then I showed him what some other bloggers are saying… Interesting about how food and gas isn’t used for inflation…
April 8th, 2008 at 10:15 am
for the time being we aren’t adjusting our budget.
we will just be driving less or purchasing less.
at least until it gets unbearable.
the reason being is it’s easy to increase our budget, but we have rarely decreased it.
we will see how it works.
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May 1st, 2008 at 12:34 pm
I remember little shop of horror well, i think we come from the same generation! I think it’s a great analogy for the current gas and grocery hikes at present. I just can’t believe how quickly it’s all going up!
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