Buying Power Calculator
Calculate how much your money is worth in different years using Consumer Price Index (CPI) data
Calculate Purchasing Power
The dollar amount to analyze
CPI: 9.9
CPI: 310.3
Buying Power Results
Formula: Buying Power = Amount × (Target Year CPI ÷ Reference Year CPI)
Calculation: $0 × (310.3 ÷ 9.9) = $0.00
Inflation Analysis
Historical Example
Ford Model T Example (1913 to 2024)
Original Price: $500 in 1913
Reference Year CPI (1913): 9.9
Target Year CPI (2024): 310.3
Average Worker's Wage (1913): ~$1,300/year
Calculation
Buying Power = $500 × (310.3 ÷ 9.9)
Buying Power = $500 × 31.34
Buying Power = $15,672 in 2024
Result: A $500 car in 1913 would cost about $15,672 in 2024 dollars.
CPI Historical Timeline
Consumer Price Index (CPI) values for the United States
Understanding Buying Power
Higher CPI means higher prices and lower purchasing power
CPI is based on a basket of goods and services
Inflation erodes purchasing power over time
Compare wages to inflation for real income analysis
Understanding Purchasing Power and Inflation
What is Purchasing Power?
Purchasing power represents the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. It's directly linked to inflation - as prices rise, the purchasing power of money decreases.
How Inflation Affects Your Money
- •Inflation reduces what you can buy with the same amount of money
- •Higher inflation means faster erosion of purchasing power
- •Deflation increases purchasing power but may signal economic problems
- •Real income considers both wages and inflation
Consumer Price Index (CPI)
Buying Power = Amount × (Target CPI ÷ Reference CPI)
- CPI: Consumer Price Index - measures cost of living
- Base Period: Reference point for comparison (often 1982-84 = 100)
- Inflation Rate: Percentage change in CPI over time
- Real vs Nominal: Adjusted vs unadjusted for inflation
Important: CPI may not reflect individual spending patterns. Regional differences and lifestyle changes can affect personal inflation rates.
Economic Impact
Understanding purchasing power helps with financial planning, investment decisions, and evaluating economic policies.
Investment Strategy
Assets that appreciate faster than inflation help preserve purchasing power over time.
Salary Negotiations
Compare salary increases to inflation rates to understand real income changes.