I’ve been getting salary raises over the years, but it feels like I have less money than before. I must be crazy because it almost feels like I’ve been losing money, which is impossible since my salary has only gone up and I track every penny.
Stay off the henny.
You know what, that’s probably due to inflation.
Inflation is an increase in the general level of prices of products and services over a specific time period, typically over the course of a year. It is very normal to see a steady increase in the general level of prices.
And why is that?
Every year prices seem to go up a bit for a variety of reasons–for example, due to increases in demand or price increases for reproductive resources. So, if your salary raises are less than the rates of inflation, you’re basically losing money.
Oh damn. That makes sense. I better check! Where can I find their info?
Okay, so this is tracked by the Canadian government, I’d presume?
The info is online, found on the Statistics Canada website.
Yes, that’s correct. Our federal government tracks and calculates inflation using the CPI, which stands for Consumer Price Index.
How does that work?
They use representative baskets to account for the consumption of over 600 goods and services across the country. They then categorize and weigh each item by importance for a typical Canadian household in what they call a shopping basket. Finally, they convert that basket into an index to evaluate and compare.
Okay, I see…How perfectly accurate is their data?
Unfortunately, the CPI has its flaws. This is because the CPI measures using a typical household of four, but of course, households can come in all kinds of sizes with all kinds of spending patterns. On top of that, product quality changes and new products come out. And so, spending patterns and product values can change. These sorts of things aren’t accounted for in the CPI, so it’s not at all perfect, but it’s still quite accurate.