Bad news: inflation is already affecting our daily lives
If you’ve been following the news, you’ve probably heard that a wave of inflation makes life more expensive. but what does that mean exactly?
Inflation refers to an increase in the cost of goods and services. Or, to put it another way, during times of inflation you will have to spend more money – sometimes a lot more – to buy the things you normally buy.
Some degree of inflation is normal over time. In 2020, for example, the inflation rate was 1.4%, according to consumer price index data released by the Department of Labor’s Bureau of Labor Statistics. This means that goods and services cost on average 1.4% more than the previous year.
But in May, the cost of goods and services rose 5% from the price levels of the previous year. And it’s a more drastic leap.
Why is inflation hitting us so hard right now?
The US economy is starting to recover from a brutal and turbulent start to 2020 until 2021. This is certainly a good thing. But an increase in consumer demand has caused supply to tighten, pushing up the cost of goods and services.
It should also be remembered that many supply chains were disrupted during the Coronavirus pandemic, when factories and factories were closed and workers were put on leave. Now the manufacturers are operating in catch-up mode, but they are not doing it fast enough. And when the demand for just about any item or product exceeds its supply, prices are likely to rise.
This is precisely what happens in the housing market today. Limited inventory is pushing home prices up at a time when potential buyers are keen to take advantage of the weak mortgage rates. And the same concept applies to much cheaper purchases, like the everyday items you might buy at grocery.
What costs Americans more?
Well, pretty much everything. These days, you might end up spending more money on things like:
- Gasoline
- Supermarket purchases
- Meal at the restaurant
- Clothing
- Home improvement and maintenance
Plus, if you’re looking to buy a car this summer, be prepared to be shocked. Granted, an automobile is far from an everyday purchase, but it is also an essential purchase if your vehicle stops moving.
How to fight inflation
The problem with inflation is that it can surprise you. You may not notice that you are spending an extra $ 3 per week at the pump or $ 12 per week at the supermarket. But over time, those extra expenses could add up and force you to build up a credit card balance.
The best way to avoid this is to be careful with your spending. You can’t completely avoid buying food, but if you notice that your grocery bills are higher than usual, you may need to temporarily cut back into another category, such as entertainment.
If you charge a large portion of your living expenses to your credit card, a good bet is to check your balance every week rather than waiting for your bill to fall due. This way you will be aware of what you are spending.
Will prices stay high for a long time?
It’s hard to say. As supply chains catch up with demand, prices should start to fall. But whether that happens this summer, this fall, or until 2022 remains to be determined. That’s why it’s important to be vigilant about your spending and regularly monitor your finances.
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