Each month, the U.S. Bureau of Labor and Statistics updates inflation numbers by publishing data for the Consumer Price Index, or CPI. This number represents the cost of a range of goods and services commonly purchased by households in the U.S.
In the past year, the number is up 8.5%, meaning that a weighted average of the cost of commonly purchased goods and services has risen 8.5% in 12 short months.
It’s a rule of thumb that lets you easily calculate how long it will take your money to double at a given rate of return.
A little bit of inflation is good for a healthy economy. If consumers can expect prices to rise, they will be more inclined to spend money now rather than waiting for better prices later on.
Everyone will have their own unique rate of personal inflation based on what you tend to spend your money on and how your tastes and needs change with time.
The worst decade for inflation in the last 100 years were the 1970s. Using the Rule of 72 / 70, we can see that spending power was cut in half from 1970 to 1980, and the CPI index we looked at above showed precisely that.