I keep very good in recording my cost of living (Groceries, Utilities, Insurance, you name it).
I just looked at the Consumer Price Index and Inflation data for the USA for 2025, and both are around just 3%.
But pretty much EVERYTHING has increased for me by way more than 3% year over year. And no, I haven't changed what I'm shopping, where I am shopping, or anything major. It also doesn't jive with what I'm hearing from families and individuals around me where everyone is complaining about skyrocketing prices and cost of living.
Can someone explain the discrepancy? How are you planning for the next years and what data source are you using?
EDIT: Why did I compare my personal spending and analyze the increase year over year? I am approving salary increases for 2026 this week. And according to the data, CPI/Inflation is 3%, and the proposed salary increase is along these lines. However, as said above, this doesn't make sense to me, as real cost increase seems to be more 7-8% (according to my personal data). So bonus question: if I'm not using CPI or inflation, which data source is better?
Why does it feel like all cost/prices are up, but yet CPI and inflation is only 3%?
byu/Netzroller infinancialindependence
Posted by Netzroller
32 Comments
This administration says that inflation has been defeated and isn’t a thing. So don’t expect the government’s published data to be accurate. Trust your eyes and ears.
People don’t stop buying so sellers keep raising the price.
Govt cooks the number every year on this. You sir just realized that if the govt tell you inflation is 3% then it is actually 30% accumulative for you as it is compounded over time. (Not included last year)
Checkout truflation for a more accurate guide to inflation
Because CPI is funny math (new math?) that hasn’t tracked *actual* cost of living for over half a century. Know that SS payments and many other COL adjustments are tied to CPI, so the gubmint has an incentive to underestimate CPI. The soaring price of gold and silver tells the real story of where inflation is heading.
Can someone explain the discrepancy? We elected a felon.
How are you planning for the next years and what data source are you using?
I’ll continue to invest because poors might get fucked but billionaires won’t. Source:eyes and ears
because CPI is not just a straight measure of prices. To be clear this doesn’t mean it is fake or wrong it just isn’t what many people think it is.
CPI is based on a basket of goods **but the amount of goods and the composition of those goods in that basket also change**. It isn’t a fixed standard of living.
The classic example is a family cooks steaks once a month but prices get too high so they switch to hamburgers. The cost of the basket of goods actually moderated a bit due to their spending changs BUT they have hamburger on their cookout not steaks. If you wanted to keep eating steaks your cost would be higher than CPI reports.
Likewise cars have gotten more efficient. Gasoline is a good in the basket of goods and lets say over some period of time gasoline is up 20% but over the same period of time the median vehicle has 8% higher fuel economy. The the gasoline cost contribution to CPI isn’t 20% but 1.20/1.08 = 1.11 = 11%. However if you are driving some 20 year clunker well your fuel costs will be up 20% over that period of time not 11%. Just because the median car gained 8% fuel efficiency doesn’t mean your car magically did.
CPI is measuring the change in cost of the benchmark household but **that stereotypical household spending is not held to a fixed standard of living**.
**Now ‘should’ cpi work that way?** Well there is some debate on that but regardless just because CPI increase 3% doesn’t mean your costs will increase 3% at the same standard of living even IF you matched the benchmark household spending at the start of the year. If you don’t reduce and they do then your costs are going to be higher.
On edit: some people point out the current administration but CPI for 2024 was 3.1% most people unless they were income constrained and thus cut their standard of living saw costs rise higher than 3.1% in 2024. Now I agree that with an administration more likely to put their thumb on the scale the discrepency will get larger but the underlying factors are there even with full transparency and honesty.
Because you pay attention to the things that have increased in price but don’t pay attention to things that haven’t.
The President said there was no inflation on 60 Minutes last Sunday.
Most grocery prices have gone way down since Biden was ousted. But yes, other things are up.
Governments lie about inflation. It’s actually a massive red flag when governments start doing that. For instance I believe it was Germany reported inflation at around 10% but in reality their inflation was 20-30% daily! When you see this, it’s one of the indicators that a collapse is inbound
Remember in August when the current administration fired the head of the Bureau of Labor Statistics and installed a Project 2025 co-author because the monthly job numbers were so terrible?
The BLS is also responsible for publishing CPI data. That should give you an idea of what’s going on.
The government is not incentivized to report real CPI data. They have obligations, such as Social Security, pensions, disability, and others, that are tied to inflation. High inflation means that those distributions go up.
There are also several other mechanisms that they use to obfuscate the real situation. One adjustment is the substitution adjustment which says that consumers will go with a cheaper, similar alternative. Beef price goes up? Consumers will just go for pork which has not gone up so beef does not get counted.
Another is hedonic quality adjustment. iPhones used to cost $499, but they’ve improved since those times and the price reflects that.
Now it’s not as cut and dry as that, but ultimately the government doesn’t have an incentive to report anything higher than the absolute bare minimum they can come up with.
Many people, including myself and independent data sources (shadow stats, etc..), peg actual inflation right now close to 7%.
The biggest two you didn’t mention: rents and gasoline prices? Both are actually in deflation. I mean, let’s be serious here, gasoline prices are not high, except for California where there are specifically taxes. Rents are not “low,” but they are overall falling, especially in South and Midwest where there were a lot of building (not in major cities, because major cities prevent building more units). So if you include rents and transport prices, then inflation is not “high,” it’s ~3% with tariffs. Excluding tariffs inflation is actually only slightly higher than 2%.
CPI measures price increases among a basket of goods and applies all sorts of adjustments that tend to bring the headline number down. For example, the data removes price increases due to increased quality of products and other innovations. Also, when the price of something in the basket rises too quickly, they substitute it out for something else cheaper, lol.
Anyway, 3% is still a problem.
Because the basket of goods changes to worse slop whenever the thing they actually wanted no longer ends up in the basket because its too expensive.
Are you sure your math is correct? Or that you’re really tracking everything?
I track everything for well over 15 years now. And my current personal inflation is 2.85%… so fairly close to the 3% published rate.
Inside the numbers things are all over the place. Utilities (electric & gas) have gone up about 8%. But I have solar so the weighted average of that component in my personal inflation is 0.13%.
My mortgage (doesn’t include insurance, maintenance or property taxes) makes up 35% of my spend but has an inflation of 0% as I’m on a fixed mortgage, so that helps with my overall personal inflation.
And so on… whatever the CPI is doesn’t really matter though it’s useful to know. What’s really important is your own personal rate of inflation.
I’m FI but not yet RE, so my health insurance is through my work. However, if I were to be paying for it myself, then the 24% increase in premiums currently in place for 2026 would push up my personal rate of inflation to 5.16% for example. Still not super crazy in the grand scheme of things for an expensive sub-category but something like that would make a difference.
StatisticalMan has a good answer. The other part is that CPI is both a semi specific consumer, it’s an urban consumer metric, and location generic, it’s across the entire country. This means it’s highly unlikely to exactly match any single consumer both on a basket of goods and the location. Your basket of goods probably has zero education expenses as a common example and you obviously live in a single location and not averagely across the country.
If you want numbers that are likely to be more aligned, you can look at the data and get more specific both on category and on location. This still won’t be exact but should be closer.
As far as I’m aware a career bureaucrat is still in charge of the BLS. If you think the gov has been cooking numbers for years or decades then whatever, but it is unlikely at this point that Trump has specifically changed anything, at least majorly. He backed down from installing a stooge last I checked.
Inflation is very hard to grasp. People think they remember last year’s price, but they’re really recalling a general range from 5 years ago. Inflation compounds, so prices are up 30-50% in that time.
Additionally you may buy eggs every week, but many of our individual purchase are infrequent even though there are a lot of them, e.g. new car, fridge, roof, dental procedure, etc. So when you haven’t had the experience you’re often comparing to your last purchase.
Average inflation since 2022 is like 5%, so more than the most recent figures, and again, a little hard to grasp. This is on the aggregate of course, many things have compounded by much more that.
For any national data, there is also private research – investment firms with better data will outperform all else equal so the incentive is there – and I’ve not seen much evidence that they deviate substantially over time.
Inflation sucks, but you should work to keep your salary ahead of it, and invest in businesses which naturally raise prices to compensate.
Simple. Inflation is like a mountain. Once you’ve gone through a steep part of the climb , you’re still tired even if you’re now on a gradual slope. It’s the cumulative effect of inflation that takes its toll.
You’re feeling the 5% post Covid along with the 4% ..and the 3% ….
No politics. What you feel is not a one time 3% pop. It’s the relentless 3 or 4 or 5 percent that cumulatively add up. It’s just like compounding in reverse .
The increase in money supply is more reflective of the increase we see in our daily purchases.
I don’t know but I can tell you the bag of dog treats I am used to buying just went from $14.49 to $31.09 in the space of just over a month (Sept 26 > Today, Nov. 4th.
Because the government lies, and it doesn’t matter if its red team or blue team.
Both love spending your money, and inflation itself is hidden taxation.
The more they can slip by the public, the more they can spend.
LOL to anyone believing a damne thing Uncle Sugar in DC publicly releases as … (LOL) …”data”
You need to consider the compounding effect of inflation every year. Below is a simplified computation.
Infation (approximation) for the past five years are:
2021~4.1 %
2022~11.6 %
2023~9.7 %
2024~3.6 %
2025~3%
Computing the accumulated compounding effect for five years:
(1.041×1.116×1.097×1.036×1.03) = 1.35994
(1.35994-1) x 100% = 35.99%
The approximate inflation compounded for tge past 5 years is ~ 36% !!!
This is why we 1) aim to grow our income through promotion or looking for new opportunities and 2) at the same time, we aim to grow/ preserve our wealth by investing in assets that can earn passive income that can offset or beat the average inflation.
My average increase cost for groceries in the last four years increased an average annualized 7.7% year over year, but it was definitely more intense in the last year (17% year over year so far in 2025)
I’m in a HCOL area, and I have growing kids, so take this anecdotal evidence with additional salt. 🙂
Most of my inflation is in groceries and restaurants. Rent is about 3%, gasoline is almost net zero, utilities around 6%.
Because the government has been cooking its books on economic indicators for years. Every administration cooks them just a little bit more. Also, because the government completely screwed all of us during the pandemic and effectively inflated our currency by 40%. So whatever the numbers out now, we are all 40% poorer than we were 5 years ago. If we have the same income
My expenses for everything other than beef have stayed pretty much identical for the last year. I noticed a huge price increase during/right after covid and everything but it feels like it’s all leveled out. So the numbers feel pretty accurate to me.
Of course, many groups of people claim all the price increases happened during whatever timeframe supports their narrative.. Whether that be blaming the last administration or the current administration.
So I got curious. We use our local grocery store curbside pickup. This means I can very easily look at prices from past orders up to several years past and compare them to now.
Here are some data points. Still anecdotal but enlightening to me and I’m just choosing some random staples and sundries not intentionally biasing the data.
Didn’t buy much beef because I think we had bought some in bulk for the freezer around then. Otherwise pretty standard stuff. So my completely unscientific random basket was $93.05 a year ago and is $97.72 today. 5% more expensive. Not actually what I had expected and not too terrible.
Last November/Now
Brand name round sourdough bread: $6.84/$7.33
Sara Lee White Whole Grain Bread: $3.31/$3.51
Store brand sliced provolone (packaged): $3.10/$3.13
Half Gallon Organic 2% Milk: $5.08/$6.26
Grade A Free Range Eggs (18): $7.57/$9.95
Store Brand Butter Sticks: $5.08/$4.18
Bleach: $4.41/$4.45
1pint Vanilla Ice Cream: $4.13/$4.33
Store brand 3lb bag mandarin oranges: $4.13/$3.77
6 oz raw bagged spinach: $4.54/$2.29
5# bag of potatoes: $1.50/$2.38
9.8oz blueberries: $5.22/$5.23
1.2# extra lean strew beef: $9.45/$10.69
10 starbucks K-Cups: $9.38/$10.95
16 oz extra sharp cheddar: $7.58/$7.65
10 pack coca cola mini cans: $7.24/$6.28
12 oz store bacon: $4.49/$5.24
Right wing press!!
You cannot apply an average to an individual, nor can you expect each individual to be near the average. I think a lot of inflation is location dependent.
Because they have gone up. Just because the rate of growth in inflation has slowed down to 3%, doesn’t mean that any of the previous growth has disappeared. Since 2020, inflation has been 25%. If something rose 21% over 4 years, and then only goes up by 3% in the fifth year, the increase of 3% is now applied to a bigger number and feels larger. If something cost 1 dollar in 2020 and was 1.21 in 2024, a 3% increase would take it close to 1.25. So a 3% increase feels bigger than it used to, because the base priceincreased so much due to inflation in recent years.
Secondly, from a psychological perspective, we don’t actually register the increase in price of every item until, suddenly, we do. I might not buy hot dogs every week, and maybe I bought them last year for a BBQ, but I was in a hurry and didn’t register the price, and now this year I get one for a BBQ but I notice the price and it’s like 20% more than what I remember it used to be.
Add to all of this the fact that even if the average inflation rate is one number, all individual items wiil have a different number. Some things went up by 5% and other by 1% in the last year. There are definitely certain items that have doubled in price over the last couple of years and it definitely makes things feel worse than they are.