Today the U.S. Bureau of Labor Statistics released the Consumer Price Index, reporting an increase of 1.7% for 2012.
For me, that number is largely irrelevant. The big question is, how much did my personal CPI increase? It boils down to the choices I make in my everyday life and how I spend my money.
There are lots of interesting topics to discuss better ways to build emotional and financial wealth, ignore Wall Street and get on with your life.
In the long run, whether you own iShares, Vanguard or DFA funds and how you allocate between large and small and domestic and international and whether you own 2% of gold (or commodities) in your portfolio or 5%, is not that big a deal.
What is a big deal is how fast your personal CPI grows from year to year. The impact it has over the sustainability of one’s financial resources over a lifetime is astounding, even for folks who are retired.
As investors and consumers we have significant control over our personal CPI. Don’t let anyone tell you otherwise. I see it every day in my work with folks who are committed to keeping personal CPI in check. It is an integral part of the financial planning process.
Whether you are a 25 year old with a four-figure portfolio, or a 70 year old retiring doctor with a seven-figure portfolio, your personal CPI is critically important.
Earlier this week Anne Tergersen of WSJ wrote a compelling piece titled “Seven Resolutions to Get Your Nest Egg In Shape.” Her #1 resolution? I Will Track My Spending.
If you don’t know how much you are spending over the course of a year, what you are spending it on, and how much spending has gone up year over year, you are in the dark over what is one of the most important components to building wealth.