Consumer prices are up 7.9% from a year ago. It will get worse after Russia’s invasion of Ukraine sends energy prices surging. According to AAA, Gasoline prices have jumped 59 cents a gallon in just the last week. Diesel prices have jumped even more sharply, to nearly $5.06 per gallon.
It isn’t just the energy sector showing signs of breakaway prices. Unfortunately, even sadly, small businesses that were ravaged by Covid now face rapidly increasing costs for inventory. Many local economies have no reserve and further, their customer base has never had a chance to stabilize.
Nationally, the Federal Reserve will be forced to raise interest rates more than it would like. In the moment, these interest increases seem minor but in fact are very expensive for the consumer. Consider the housing market, already screwed up by housing shortages that create their own inflation. NBC had a good example in its morning report:
“Let’s say a consumer wants to buy a $500,000 home; they get a $400,000 mortgage at a 30-year fixed rate. They would pay about $80,000 more over the loan’s term and about $200 more each month with a 4% mortgage rate versus 3%.”
In fact, any family indebtedness can suddenly loom too large to handle. If a reader has variable rate loans, make every effort to convert them to fixed rate loans. Pay attention to credit card debt; credit card finance charges are exorbitant in any case – adjust home budgets to pay down card debt more rapidly.
Savings accounts, on the other hand, stand to receive higher interest rates. Keep an eye on several types of savings products from local banks to bonds to online banks.
Setting aside normal consumer purchasing of clothes, vacations, automobiles, home improvement and other extraneous buying, it is at the dinner table, at child care, at college tuition, at insurance payments and elderly care that inflation’s tires meet the road. Salary never keeps up with inflation but costs do.
So take a good look at future expenses like taxes, insurance, travel cost and other larger cost items that may cause issues that can defeat staying within one’s income. Be prepared.