It's Getting Pricey in Here

Inflation is hitting hard

It is no surprise our wallets (digital and traditional) are feeling the pain of cost increases. Prices are rising sharply for goods and services in all major categories. The May all items inflation figure of 8.6% was the highest 12-month increase since December 1981.

The national average price of regular gasoline is $4.94. This a 61% increase from a year ago. For those that put premium in their tanks, the current average is $5.65 – an 80% annual increase. Regular unleaded reached a high of $5.016 on 6/14/22. Driving around has become much more expensive.

Not surprisingly, buying a home has become more expensive too. Home prices have been rising steadily since the pandemic as employees took advantage or remote working opportunities. Rising housing prices contribute to higher personal net worth for current homeowners but are problematic for new home buyers. There are numerous reports of how home price appreciation has priced many out of the market. According to the May Consumer Price Index (CPI) Summary, “the shelter index increased 0.6% in May, the largest monthly increase since March 2004.” Now, with the Fed increasing its benchmark interest rate, mortgage rates have shot up to levels not seen since 2008. The average 30-year fixed rate mortgage is approaching 6.0%.

Source: St. Louis Federal Reserve; Freddie Mac

Food price increases are also the highest in decades. Again, according the May CPI report, “The food at home index rose 11.9% over the last 12 months, the largest 12-month increase since the period ending April 1979.” It is hard to escape from this when “All six major grocery store food group indexes increased…with five of the six rising more than 10%.”

Obviously, higher prices strain your budget. Gas, food, and housing costs are unavoidable, but we often have a hard time scaling back on discretionary purchases when necessary. Saving and investing often take a back seat when money becomes scarcer, and the future starts to look more uncertain. It is times like these when having a financial plan can help keep longer-term objectives in perspective and make good decisions today.

We know times may be getting tougher. We cannot predict the future but can only prepare.