Over the next 11 business days, I’ll be posting reader-submitted questions of the day. This is my attempt to try to open up AFM to the readers and make it a little more interactive. Plus, it’s a great way for me to avoid having to come up with questions!
Today’s question comes to us from AFM reader and financial planner, Dylan Ross:
What do you think is an appropriate number to use for inflation for planning purposes? Professionally, I think 3% is a little to sunny to plan a future on.
That’s a good question. To my knowledge, the most widely-used inflation gauge is the Consumer Price Index (CPI). So, if we don’t use a 3% inflation rate for planning purposes, what number should we use? That’s a good question. I suppose we could use a range of 3% to 5% and plan accordingly. I think the important thing to focus on is long-term inflation, not the short-term spasms that occur from time to time.
What are your thoughts?