Money Doesn't Stretch Like It Used to. How to Measure Your Own Purchasing Power

Suppose your typical month runs to 10,000 yuan: 2,000 on food, 3,000 on rent, 5,000 on everything else. Now imagine prices shift over the year, food up 10%, rent up 5%, everything else flat. Keeping exactly the same diet, the same apartment, the same habits would then cost 10,350. The cost of this unchanged basket rises by 3.5%.

Now imagine a neighbour whose month also totals 10,000 yuan but is built differently: 5,000 on food, 3,000 on rent, 2,000 on the rest. Those same price changes cost that household 10,650, a 6.5% rise. Same prices, same nominal budget, almost double the squeeze. The difference is structure. Food takes up more of one ledger than the other, so food inflation lands harder on one than the other.

This is why the official CPI only tells part of the story. It tracks a representative basket of goods and services, not your basket. Reading both together helps identify which price changes affect your household most.

To build your own reading, take the most recent complete month and jot down the quantity, unit price, and purpose of your main purchases. Compare what those same quantities would cost at the next period’s prices. Anything genuinely new, a phone upgrade, a bigger place, extra trips, goes in its own column as a change in lifestyle rather than a price rise.

Assume your basket costs 3% more each year, and you park 100,000 yuan where it never moves. Ten years from now the balance still reads 100,000, but what it buys has been divided away: 100,000 ÷ 1.03^10 comes to roughly 74,409 yuan of today's purchasing power. The account number held still while the world underneath it got more expensive.

Do better and it still isn't enough. If the account grows at 2% a year after fees and taxes, ten years later you hold about 121,899, a tidy rise. Revalued against the same 3% price path, that's about 90,705 yuan of today's goods. You ended up with more money and less buying power.

That's only the old money. To see where a household actually stands, add the savings that keep arriving each year. Record each new contribution at its actual date alongside the original balance, and the calculation behind that is in compounding, fees, and purchasing power.

A popular shortcut subtracts GDP growth from M2 growth and calls the result everyone's "real depreciation rate." That subtraction leaves out changes in money velocity and requires a clear distinction between nominal and real GDP. Spending, saving, borrowing, repayment, and changes in the supply of goods and services all affect the relationship between money and prices. Examine money stock, velocity, prices, and real output together, then use price measures that correspond to the goods and services your household buys.

If what you need is next month's budget, start with rent, food, transport. If the goal is a down payment in three years, track the homes you're targeting, the required ratio, and your current savings. Numbers only become useful once they're attached to a specific object and a specific date.

Three jobs want to live on one timeline. Near-term spending needs funds that are reachable when the bill arrives. A future target needs a running number for how much more is needed. Long-term accumulation needs its own ledger of actual returns and actual fees, converted back into today's goods.

So: tuition due in a year gets its amount and payment date fixed first, then you choose an arrangement that matches that date. The long-term accounts get reviewed on their own terms, fees included. Laid out this way you can see, at a glance, whether life is being paid for and how long-term savings are progressing.

Price measures and the full arithmetic live in price measures and household purchasing power; cash reserves and concentrated income in income concentration and cash reserves. If borrowing to buy an asset is on the table, read three calculations before borrowing to buy an asset first.