The Chapwood Index Again Explains Why The Middle Class Are Falling Behind

DALLAS, Feb. 10, 2015 /PRNewswire/ -- The Chapwood Index, which released its 2014 full year results today, reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.

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Ed Butowsky, the founder of the Chapwood Index, asserts that this index should replace the Consumer Price Index when people look for an accurate measure of the true cost of living increase.   

The Chapwood Index exposes why middle-class Americans — salaried workers who are given routine pay hikes and retirees who depend on annual increases in their corporate pension and Social Security payments — cannot maintain their standard of living. The Index shows that their income increases, which is tied to the CPI being so manipulated over the years. With the CPI no longer reflecting the true cost of living increase, the middle class can no longer keep up with their expenses. This explains why they increasingly have to turn to the government for entitlements to bail them out.

Salary and benefit increases are pegged to the Consumer Price Index (CPI), which for more than a century has purported to reflect the fluctuation in prices for a typical "basket of goods" in American cities — but which actually has not done that for more than 30 years.

The middle class has seen its purchasing power decline dramatically in the last three decades, forcing more and more people to seek entitlements when their savings are gone. As long as pay raises and benefit increases are tied to a false CPI, this trend will continue.

"I am tired of observing people committing financial suicide by using a flawed statistic that is universally known to be inaccurate as a benchmark for maintaining a constant standard of living," said Ed Butowksy, managing partner of Chapwood Investments.

The Index forces middle-class Americans to recognize that their dependence on income increases, pegged to the much-lower CPI. This virtually guarantees that they will run out of money before they die, because people are living longer and there is a huge difference between the CPI and the real world.

As an example, the CPI rose 0.8 percent in 2014. Although in New York, the Chapwood Index shows that the real cost of living increase was 12.4 percent. This means that if you work in the New York area and got a 0.8 percent raise in your salary, it obviously was not nearly enough to cover the increase in your day-to-day expenses.

It was especially bad in San Jose, CA where the Chapwood Index shows a 13.7 percent rise in the cost of living. Even the city with the lowest increase, Colorado Springs, showed a 6.6 percent rise, 5.8 percent higher than the CPI.

So wherever you live, if you are a salaried employee, a social security recipient, corporate pension benefit recipient and your income increase was tied to the CPI, in 2014 your purchasing power deteriorated. 

"The unintended consequence of the CPI is that people who depend on Social Security and pensions don't get what they need," Butowsky said. "Our hope is that people will review the Index, see what the real cost of living is where they live and understand that it leaves them exposed. And, finally, we hope that they will consult with a financial adviser to plan for the future."

What the Chapwood Index found was that the government grossly underestimates the real cost of living increase for most Americans on average 600 basis points by using the biased proxy called the Consumer Price Index (CPI).

"Individual purchasing power is sinking in quicksand, and people are unable to maintain their current lifestyle," Butowsky stated. "Individuals must focus on having their salaries and portfolios increase over and above the combination of the government's reported CPI and their personal tax rate. It is about time someone does something about this tragedy and stands up to explain why people are falling behind each year. This is why I created the Chapwood Index."

The goal of the Chapwood Index is to shine a true light on a slow moving virus that is destroying the economic and emotional fiber in this country, affording more Americans the opportunity to become educated consumers and take immediate control of their spending habits and personal finances.

Index Methodology:
In creating the Chapwood Index, Chapwood's research team compiled a list of over 4,000 products and services that consumers across the country spend money on in their daily lives. That list was narrowed down to the top 500 items that were used most frequently.

Fluctuations in the true price for each of those items were carefully tracked and monitored without any manipulation or biases, quarter-by-quarter and city-by-city, creating a weighted index based on price.

Examples of items included in the Index: Starbucks coffee, Advil, gasoline, taxes, tolls, fast-food restaurants, computer paper, toothpaste, oil changes, car washes, pizza, internet service, Gymboree lessons, mobile phone service, cable TV, dry cleaning, movie tickets, hairspray, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, underwear and People magazine.

For more information on the Chapwood Index, or to speak with Ed Butowsky, please contact at 972 897-0197, or email Ed at ed@chapwoodinvestments.com.

SOURCE Chapwood Index

Related Links

http://www.chapwoodindex.com