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Inflation crosses 11%. Somehow, the newspaper headline doesn’t shock you. After all, you have been feeling the pinch for some time now. The prices of food are spiralling, so is the cost of commuting to office, children’s school fees and clothes. But wait a minute, your mobile bills are actually lower than what they were a year ago. And come to think of it, the increase in school fees is less than 11%. But what you shell out for the weekend movie and dinner is substantially higher.

Neither your math nor your memory is wrong. Inflation for you is not the same as has been reported in the newspapers. It can be higher or lower depending on your consumption basket. If you have a penchant for trying out different restaurants every week, the inflation rate of your household will be higher compared with that of a family that eats out once in two months. (For detailed explanation, read “MT Basics”.)

Even the inflation rate applicable to you is not the same throughout your life. Consumption baskets change over time. At 25, you may be insulated from the school fee hike because you have no children. But at 45, education could constitute a chunky portion of your consumption basket and contribute significantly to your inflation. This dynamism is explained in the table alongside.

So two things are clear. To understand the real impact of price rise, you must customise inflation according to your consumption. Also, you must revise the proportion of products and services in your personal inflation index every four to five years.

Experts’ take We spoke to five financial planners about how they use inflation in financial planning.
	Do clients know about inflation accounting? Has the awareness increased recently?	In the past 3-5 years, have clients’ incomes kept pace with inflation?	What inflation rate do you use while planning clients’ finances? Is it customised?	What do you think will be the inflation rate six months from now?
Amar Pandit, Director, My Financial Advisor	All my clients understand inflation accounting. There’s no significant rise in awareness though they are more concerned	The incomes of almost all clients have increased faster than inflation	We consider 6% inflation. But it is customised to the client’s consumption pattern. It may go up to 8-10%	8-8.5% if crude oil prices come down
Naresh Pachisia, Managing director, SKP Securities	In good times, most investors do not bother about inflation. But for the past few months everyone has been very concerned	All clients, irrespective of the industry they work in, have enjoyed income increments higher than the rate of inflation	The average inflation used for computation is 8%. We do customise the rate sometimes	10% or less
Tamanna Banerjee, Certified financial planner	Not many clients knew about it, but awareness has grown in recent months	In the past few years, the increase in incomes has beaten inflation, but not so in the past six months	Some time ago, it was 5%. Now I have increased it to about 8%. It’s tough to customise inflation	8-10%
Veer Sardesai, CEO, Sardesai Finance	They are not aware of the real damage done by inflation. Concern among clients has risen in the past few months	The salaries of all clients have grown faster than inflation	Equity and real estate investors needn’t worry about inflation as these assets give higher returns in the long term. It’s difficult to customise inflation	No change
Anil Chopra, CEO & director, Bajaj Capital	We try to educate our clients about it. Questions about inflation are more frequent now	Their incomes have risen much faster than inflation	The average inflation considered is 6%. We don’t customise inflation	9% (approximately)