When prices rise across the board, people tend to “hunker down,” eat more meals at home, shop less, spend less and cut back. However, inflation rate increases have impacted various areas of the economy in different ways,1 and consumer spending has been up and down in recent months as well.2
As interest rates hold steady and inflation increases, people have had to pick and choose where they spend money. Eating out is one luxury people have cut back on. The cost of preparing food at home dropped 2.2 percent in September from the same month in 2015, while the cost of eating out increased 2.4 percent over that same period.3
It’s important to remember that while the overall inflation rate represents a wide variety of measures, not all inflation rates are the same. In recent years, prices of some things have increased at a much higher rate than others. The prices of food and gas tend to move both up and down over time. However, cable television prices have risen every year for the past 20 years –and the rate in each of those years has been higher than the prevailing inflation rate.4
College is another consistent inflation monger. From 2003 to 2014, the price for undergraduate tuition, fees, room and board at a public institution increased by 34 percent; 25 percent at private nonprofit colleges.5
So, it would appear that families with teenagers may experience a bit higher inflation than others based on their typical household consumption of gas, food, college and cable TV.
While some inflation can be attributed to levels of consumption, supply and demand, there are other factors that can contribute. Some economists think that the U.S. will experience a long period of rising inflation simply because we are overdue. Between 1990 and 2010, the average inflation in the U.S. was 2.2 percent.6
Last year was the first time since 1932 that inflation dropped below 2 percent in each of the Group of Seven (G7) industrialized countries (United States, Canada, France, Germany, Italy, Japan, United Kingdom).7
While it is good to keep up with inflation in the headlines, it may be more useful to see how inflation is impacting your own finances. Now that it has become so common to pay for goods via credit cards, cellphones and computers, it’s not the same as opening up your wallet and seeing your cash dwindle.
That makes it all the more important to stay on top of your spending by tracking purchases and reviewing how much you may be paying out in utilities or other expenditures you have set up for automatic payments each month.
All of these expenses can impact your financial strategy for retirement. If you’re paying too much now and not even realizing it, you don’t want to find that out for the first time after you stop earning a paycheck. We can help you evaluate your spending and retirement savings to see if you’re staying on track for the retirement lifestyle you want in the future.
Nate Miller
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1 Bob Bryan. Business Insider. Oct. 18, 2016. “Tuesday’s inflation report just confirmed 3 of the biggest business trends in the US.” http://www.businessinsider.com/cpi-inflation-confirmed-restaurant-car-and-healthcare-trends-2016-10. Accessed Nov. 1, 2016.
2 Lucia Mutikani. Reuters. Oct. 31, 2016. “U.S. consumer spending ends third-quarter with strong momentum.” http://www.reuters.com/article/us-usa-economy-idUSKBN12V1BM. Accessed Nov. 1, 2016.
3 Bob Bryan. Business Insider. Oct. 18, 2016. “Tuesday’s inflation report just confirmed 3 of the biggest business trends in the US.” http://www.businessinsider.com/cpi-inflation-confirmed-restaurant-car-and-healthcare-trends-2016-10. Accessed Nov. 1, 2016.
4 Stephen Lovely. Cordcutting.com. Oct. 31, 2016. “Cable Prices Have Risen Faster Than Inflation For Each Of The Past 20 Years.” http://cordcutting.com/cable-prices-have-risen-faster-than-inflation-for-each-of-the-past-20-years/. Accessed Nov. 1, 2016.
5 National Center for Education Statistics. 2016. “Tuition costs of colleges and universities.” http://nces.ed.gov/fastfacts/display.asp?id=76. Accessed Nov. 1, 2016.
6 The Economist. Oct. 27, 2016. “The only thing we have to fear is fear of inflation.” http://www.economist.com/blogs/freeexchange/2016/10/bogeymen?fsrc=scn/tw/te/bl/ed/bogeymentheonlythingwehavetofearisfearofinflation. Accessed Nov. 1, 2016.
7 Ibid.
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