Bill payers may notice, but Americans in general don’t seem to pay much attention to the cost of living.
Cost of living is often an abstraction that householders admit they need to deal with but often never do.
How much is the cost of living? It is the total amount of cash a household needs to cover basic housing, occupational, and lifestyle needs.
Any list of living expenses can include mortgage or rent payments, car loans, healthcare costs, and food and utilities.
Below the surface, the cost of living can also include ancillary household expenses such as filling up the gas tank, paying a babysitter, and playing golf at the local public course, among other expenses. other day.
The cost of living index is also used by private and public businesses for the common good.
“Employers use the cost of living index to determine wages, while government organizations use them to assess the need to take measures such as annual adjustments to benefits. Social Security benefits,” Credit Summit said in a new report on the cost of living in the United States. WE
“These measures are also used by people considering relocation, especially for employment reasons.”
What makes up most of the cost of living?
In 2020, the average annual cost of living stands at $61,334, the Credit Summit report said. (The cost of living in the United States varies from state to state. For example, in California it is much higher than in Mississippi.)
Financial experts report that the average cost of living is likely to be significantly higher by 2023.
“As of early 2021, the price of energy, such as electricity, gas and other fuels, has been the main driver,” said Lyle Solomon, principal attorney with Oak View Law Group in Jersey City, NJ. to increased inflation.
“Many Americans have saved during the pandemic thanks to financial assistance and the fact that covid-19 has closed businesses and kept people at home instead of spending money on services they already have. used before.”
But that financial cushion is dwindling as consumer goods and services become more expensive due to inflation, global supply chain problems and higher interest rates.
“Especially because of the high inflation rate, American savings won’t grow much in 2022,” Solomon said. “In addition to affecting the value of savings accounts for those already saving for an emergency or retirement fund, rising prices can be a more prominent cause of upset.”
Credit Summit’s cost of living report identifies five costs that are particularly severe and cites their average annual costs for U.S. households:
Housing-related expenses (other than rent or mortgage): $2,838
Those prices will go higher unless inflation is contained.
Inflation in the US was the 13th highest out of 44 countries analyzed in the first quarter of this year, averaging 8.6%, according to the US Bureau of Labor Statistics.
“Furthermore, in the United States, the first-quarter inflation rate was nearly four times higher than in the same period in 2020,” the Credit Summit report noted.
US inflation is currently running at an annual rate of 7.7%.
Traditional high-value items such as housing, transportation and food remain the top three expenditures for most households in 2022.
“These three categories can consume a sizable portion of your income,” says Solomon. “Housing in particular is becoming increasingly expensive due to inflation, and that is the most serious problem for many households in the United States.”
Transportation is cheaper than housing, but soaring gas prices also put a strain on people’s finances. Energy prices rose significantly in 2022 before falling slightly in November.
Food costs are on the rise, and it’s a problem for low-income households in the United States.
“The cost of food in the United States is really not that expensive,” notes Solomon. “However, it can be an important issue for low-income households. If you don’t make a lot of money, takeaway as well as healthy food can make up a large portion of a household’s food budget.”
Save cost of living
Americans struggling to keep up with the cost of living need to take a step back, assess the situation, and use the financial management tools available to address these issues.
“It is important for households to budget based on monthly income,” advises Solomon. “Tracking your expenses is an effective way to modify your spending habits, but it can become overwhelming if you have a large number of payments to make.”
You should also use mobile personal finance apps like Mint, Personal Capital, or Goodbudget to get a better sense of your income and spending.
“With the right app, you can plan your finances better and save more money for the things that matter,” says Solomon.
Household heads should also focus on wants versus needs to control the cost of living.
“You need to feed yourself (get groceries) but eating out is something you want,” says Jay Zigmont, founder of money management firm Childfree Wealth in Water Valley, Miss. A beautiful home is a desire.
If these expensive items are holding you back, make an equally important decision to keep them under control.
“It might be time to downsize an expensive home or rent something further out of town, especially if you’re working remotely,” Zigmont told TheStreet. “If you’re married or cohabiting as a partner and work remotely, maybe it’s time to cut down on a car.”
Zigmont added: “The bottom line is that people need to have a budget and pay attention to their spending.
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