Inflation Purchasing Power

📖 Overview

What could a hundred thousand buy ten years ago, and what does that equal today? Run it through an inflation rate and the question answers itself. This tool compounds a past amount into the present, or discounts a present amount into the past: give it the start and end years, an annual inflation rate and the original sum, and it returns the equivalent amount, the percentage of purchasing power that remains and the cumulative inflation. Beyond a single rate it can lay out one, two, three, five and eight percent side by side, which shows how a small difference in the rate gets magnified over decades. Add an income growth rate and it also works out real income growth, because a raise that fails to keep pace with inflation means purchasing power is falling, and that gap usually says more than the figure on your payslip. The effect is not linear, and that is the part worth seeing. At two percent, a sum keeps about 82 percent of its purchasing power over ten years; at five percent it keeps closer to 61. The same decade costs you twice as much, and the difference only becomes obvious once it is laid out as a number rather than a rate.

✨ Features

• Converts past to present or present to past, compounding year by year rather than multiplying once Direction can be flipped without re-entering the amount, so both views use one set of inputs.
• Reports three figures: equivalent amount, remaining purchasing power percentage and cumulative inflation Purchasing power is expressed as a percentage and as the equivalent currency figure.
• Compares several inflation rates side by side to show how a small rate difference compounds over time Cumulative inflation is shown alongside, which is not the simple product of rate and years.
• Accepts an income growth rate and computes real income growth after inflation Real growth is reported as a percentage and in currency terms.
• Breaks the decline out year by year instead of returning a single number Each row shows the index value for that year, so any point can be checked by hand.
• Results can be copied or exported for long-range financial planning Presets cover one, two, three, five and eight percent, and a custom field accepts any rate.

🚀 How to use

1. Choose direction: past amount into today, or today into the past
2. Enter the original amount and the start and end years
3. Set the annual inflation rate, from a preset or your own value
4. If you want real income, enter your annual income growth rate
5. Press Calculate to see the equivalent amount and remaining purchasing power

⚠️ Notes

• You supply the rate: the tool does not fetch CPI online, so enter the official published figure or your own assumption, and the figure you choose drives the entire result more than anything else
• Figures are modelled: compounding uses one fixed annual rate, whereas real inflation moves year to year and those deviations accumulate, so a long horizon amplifies the error in any single-rate assumption
• Asset prices excluded: housing, equities, education and medical costs can diverge sharply from headline inflation, and those are often the expenses that dominate a household budget
• Real growth may be flattering: if your income growth figure is pre-tax or includes bonuses, the after-tax result is lower, so compare like with like when judging whether you are ahead
• Numbers only: a zero year, a start year after the end year, or an anomalous negative rate raises a message, and a start year later than the end year is rejected