Bloomberg economists Andrew Husby and Anna Wong have calculated that Americans will need to budget an additional $5200 this year due to inflation. This averages out to $433 each month to cover the costs of the same goods and services as purchased in 2021.
That's somewhat good news for many businesses, but not as positive for job seekers. The higher cost of living will compel many to re-enter the workforce and employers won't need to pay as much to hire them. Seekers may demand higher salaries than they had before, but even if salary rates increase by 10%, the rate of inflation will likely exceed this amount.
As the report states, "Inflation gauges like the Consumer Price Index have already shown prices soaring at the fastest pace since 1982. Inflation-adjusted wage growth was negative for most US workers last year, meaning their buying power weakened despite salaries rising at a historic pace. The economy is healing, but skyrocketing prices are making the recovery painful for nearly all Americans."
An estimated $2200 of the predicted increased costs will come from food and gas prices and this figure is adjusting daily as fuel prices continue to soar. As long as the Russia-Ukraine conflict continues, the global impact on the supply chain will only cause further price increases.
This period of inflation won't be ruinous, according to Bloomberg. Of the $2.5 trillion in extra savings built up during the pandemic, an estimated 27% will go toward higher costs. A majority of this savings is in the hands of the bottom 80% of earners, meaning most Americans will have funds to weather the storm.
What You Can Do To Save Some Money
Prioritize your expenses to determine what you have to have versus what you'd like to have can help you keep extra funds in your account.
Comparison shop. Believe it or not, Amazon doesn't always have the best price. Walmart, Target, and even eBay often offer lower prices with free shipping or in-store shipping that can save you money.
Cut the cord. If you've been on the fence about cutting cable and using the Internet for streaming your favorite shows, now is a great time to try it out. You can always go back to cable - most providers like increasing services.
Take advantage of coupons, two-for-one deals, and cash-back credit cards. Grocery stores have online flyers you can check before you go shopping.
When a staple, such as paper towels or toilet paper, is on sale, if you have the room in your house, stock up.
Eat at home. Restaurants are full as people are going out more after two years at home, but they are raising their prices to cover increased food and labor costs.
Consider window tints to cut down on energy costs, utilize electric yard equipment when possible, and walk to shipping places if you can. Not only is it easier on your pocketbook, but it is better for the environment too.
Continue investing for the long term. Stock market tumbles may have you second-guessing your strategy, but when the market is low, it is a good time to purchase stocks that you feel will perform well in the long run.
I Savings Bonds are on the tip of every investment advisor's tongue these days. The interest rate for I-Bonds shifts along with inflation and currently is at an annual rate of 9.62%. This rate resets (up or down) every six months.
Now is also a great time to clear your attic or basement of unused and no longer wanted items, like your Great Aunt's empire sofa that is just gathering dust. Contact a local consignment shop or auctioneer to see about freeing up some space in your home while padding your wallet at the same time.
Though not possible for some, carpooling is a great way to save money. Gas and parking expenses can be shared, which can save hundreds of dollars a year.
Sources: Bloomberg, Time, WSJ, Experian