Rising Cost of Living

As of September 2024, the annual inflation rate in the United States was 2.4%, which is just slightly higher than the Federal Reserve’s target rate of 2%. However, cost-of-living expenses for many Americans, such as food, housing, and utilities, are still considered expensive. To maintain pace with the rising cost of living, lower and middle income Americans are feeling the pressure. While many factors are out of one’s control, below are some areas of household finance that can be controlled when the cost of living is going up.

Stagnant Wages

Wages can remain stagnant for a number of reasons. For example, some corporations may not account for the rising costs of living in their raises and other perks to employees. Unlike inflation, salary is driven by different inputs. Key drivers of a salary increase include geographic location, skill level and experience, and government regulations. If possible, talk to your employer about a salary increase to match the rising cost of living. Or, consider a side-hustle to garner extra income to help you keep up with higher costs.

Cut Household Costs

When the dollar won’t go as far, seek ways to cut costs. Turn lights off when not in use and adjust thermostat settings to conserve energy. To reduce housing costs, consider renting out a part of your home. If plausible, move to a less expensive geographic area or consider downsizing to a smaller house. As concerns food costs, try to reduce dining out in restaurants, look for discounts when grocery shopping, and enjoy more meals at home. Depending on where you live, you may be able to swap out the car and either walk, bike, or utilize public transportation to get where you are going. Try to find free or low-cost entertainment options in your geographic area. Many cities have local events like open air music performances. You can split costs with friends when you do go out, and visits to museums and zoos may be free for locals on certain days.

Smart Shopper

With the insurgence of loyalty programs, it is smart to take advantage of all the discounts and rewards that may be offered to you. When available, swap name brands for generic products to stretch your dollars. Moreover, price comparison shopping can enable you to find the best price on certain goods-and with the internet at your fingertips, it is easier than ever to compare prices and stores before you buy. Preplanning is yet another cost- saving measure to combat the rising cost of living. Meals plans can help you create a shopping list and prevent you from buying on impulse. Furthermore, meals prepared at home are generally cheaper than pre-made grocery equivalents.

While it is likely that prices for goods will stabilize over the long term, it is unlikely that prices will go down. As such, changes will be necessary to lower and middle income household wages and/or spending habits in order to compete with the rising cost of living.