Uncle8888 is no different from anyone else. He is also worried about future inflation so he projected his future annual expenses @ 2.5 % inflation rate from Jan 2015 to Jan 2040 and look like this chart below:
But, in reality, when he looked back at his family of five past years monthly expenses from Oct 2001 to Feb 201; from the chart it looked so differently.
Where is the past years inflationary impact shown in the chart?
To smooth out those spikes in monthly expenses, he added in a 6-month Moving Averages; but still it did not show a clear indication of any up trend in monthly expenses due to inflationary impact.
This is not what he expected to see.
So what went wrong?
Has he grossly over-estimated the impact of inflation on his future living expenses till 2040?
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How do we model to overcome future inflation since our future month-to-month is likely to fluctuate widely?
ReplyDeleteSomeone asked me why there are many spikes?
ReplyDeleteDue to costly overseas vacations for family of five. Spikes of the similar scale are unlikely to happen in the future. Two on go instead of 5. :-)