COMMENTARY | According to the US Bureau of Labor Statistics, inflation for 2012 is averaging right around 2 percent. While our family tends to keep our costs quite low, I find this number laughable as we've seen most expenses in our lives either increase constant or take a pretty extreme jump year-over-year. Sometimes there are things that we can do about these increases in an effort to limit their effects. Other times, all we can do is cut other areas to try to keep our own overall inflation average relatively low. Here are some of our regular costs that have recently been hiking our personal inflation rate.
Maybe one of the areas in which we've seen the greatest inflation in the shortest period of time is in the realm of health insurance and health care costs. In fact, our health insurance premiums have gone up 15 percent year-over-year or about $1,250 -- a significant increase to say the least.
In an effort to compensate for this increase, we're taking several steps. First off, we're making use of the plan's HRA (health reimbursement account), which goes up by $425 this year. We're also doing things like reducing our dinners out and even cutting our pizza nights from weekly to bi-weekly. It might not sound like much, but such cuts -- sustained throughout the course of the year -- will leave us making up nearly $1,000, and greatly reduce the overall impact of the insurance increase.
From 2009 to 2010 our property taxes went up 10.3 percent and then up by another 11.5 percent from 2010 to 2011. This might sound unreasonable, but considering that in our previous home, the increase was closer to 40 percent in just two years time, it doesn't seem quite so bad. This massive increase in our previous home was a part of the reason why we decided to downsize and relocate. This move cut our annual property taxes by almost half.
Income taxes might seem like an odd addition to a list of highly inflated costs in our life and lifestyle; however, it's there nonetheless. In our home state of Illinois, our state income tax rate recently went from 3 to 5 percent. This might not sound like a big increase at first, but when you look at that 2 full percentage point increase, it equates to a 66 percent addition to the previous rate. Add to this the arrival of the fiscal cliff, which is could bring with it the return of the full payroll tax amount -- an increase of 2 percentage points - and it pushes my payroll taxes as a self-employed individual from 13.3 percent back up to 15.3 percent, a 15 percent increase.
For year end 2012, it looks like the price of gas is going to end up relatively flat even though there was a pretty high summer spike. However, over the last decade, there has been a huge increase in the cost of our gas. In 2001, we were paying about $1 a gallon. Now (as we near 2013) we're paying closer to $3.50 a gallon and have paid over $4 at once point -- a 250 percent increase, or an average of about a 25 percent increase each year spread over the 10-year period.
In order to combat this rapid rate of inflation, we've taken several steps to help us keep costs low. Since I work from home now, I'm able to save significantly on gas costs. We ended up downsizing our number of vehicles from two to one, eliminating entirely the need to put any gas into that extra vehicle. Not only this, but we've also cut down the number of road trips and driving vacations we take, which stinks, but is part of our gas savings plan. We used to take several long-weekend excursions each year, with roundtrip mileage often falling around 200 to 300 miles for each journey. Cutting two such trips out of our annual travel itinerary saves about an extra $110 on gas alone, not to mention costs for hotel stays, food, and entertainment while away.
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