How to adjust an amount for inflation
Adjusting an amount for inflation shows what it would be worth today with the same buying power. It is used to update rents, child support, old prices and settlements, and to compare prices from different years. This calculator works with any price index: type a constant yearly rate or paste the monthly figures published by your country’s statistics office.
How the calculation works
The amount is multiplied by the cumulative change of the index over the period: adjusted amount = original × (1 + month 1 rate) × (1 + month 2 rate) × … × (1 + last month rate). Monthly rates are compounded, not added. With 3% a year for 10 years, $1,000 becomes $1,343.92, not $1,300.
Inflation also means lost buying power
The same calculation, read the other way, shows how much cash loses when it sits idle. In the example above, $1,000 kept under the mattress for 10 years only buys what $744 bought at the start: a 25.6% loss. That is why money saved for the long term needs to earn at least inflation.
Is my raise a real raise?
Use the “Real pay raise” mode. A 5% raise with 3% inflation is a real gain of (1.05 ÷ 1.03) − 1 = 1.94%, slightly less than the 2% you get by subtracting. If the raise is below inflation, your paycheck grows but buys less.
Which index to use
For contracts, use the index written in the contract. To measure your own buying power, use the official consumer price index (CPI) of your country. Central bank targets are a reasonable assumption for projections, but actual inflation can be very different.