You’ve no doubt felt the effects of inflation these past few years. It’s been with us since about mid-2021 and has dramatically raised the cost of goods. This isn’t a problem that’s specific to the United States either — this issue is being felt worldwide spurred in part by the pandemic, which has led to widespread price raises, as well as supply chain shortages, construction slowdowns, and ongoing wars and conflicts.
It’s been a tough time, is the point. Which is why we’re happy to give you this good news: things are looking up.
Does that mean you’re going to see more money in your bank account this year? Not necessarily, but the Federal Reserve has done a pretty good job at bringing down inflation and avoiding a U.S. economic recession. According to the U.S. Bureau of Labor Statistics U.S. inflation as measured by the Consumer Price Index hit a sky-high 9.1%, the highest level since 1981. We felt that at the market, at the gas pump, on energy bills, and in the housing market — pretty much everywhere.
Flash forward to December 2023, and CNN Business reports that the CPI has dropped down to 3.1% and is on track to reach the Fed’s goal of 2% sometime in 2024. Hourly earnings are trending upwards, unemployment is below 4% (a historic achievement) and the Fed is… ~ cautiously ~ optimistic. But don’t break out the expensive champagne yet, just because things are trending in the right direction that doesn’t mean we are completely free from the effects of inflation.
So to help you get your finances in order and prepare for a more profitable year, we are here to break down where inflation is still hitting the hardest in 2024.
If you tried to buy a house in 2023, well… you probably didn’t end up doing it. According to Forbes, mortgage rates in 2023 were sky-high, hitting a peak of 7.79% in October, with the median home price above $400,000. Luckily, mortgage rates are trending downwards, The Federal Home Loan Mortgage Corporation, aka Freddie Mac, reports that as of January 25th, the 30-year fixed rate has settled at 6.69%.
That’s an over 1% decline from 2023’s peak but it’s still far from the pre-pandemic rate, when the mortgage rate was half of what it is today. So even though the housing market is looking healthier than the past few months, we’re still a long way away from where we were a few years ago.
So what does that mean for you?
You have two options. You can buy anyway, lock in your price in the event prices rise more, and refinance if/when mortgage rates are lower. Or you can save your money and wait it out hoping rates and prices will drop. If you have any outstanding debt, you should do the latter and make sure to bring that debt to $0 instead of dropping money on a down payment.
According to the United States Department of Agriculture, food prices at home increased by 5.8% while food-away-from-home prices increased 7.1% in 2023. You probably felt that whether you were cruising the grocery aisles or eating out with friends. Luckily food prices are decelerating but the USDA still predicts an increase of 1.3% overall.
We’re looking at a decrease in at-home prices by 0.4% and an increase in food-away-from-home prices at 4.7%. That means if you want to spend less money on food than you did in 2023, you should probably spend more time at the grocery store than the drive-thru or eating out at a restaurant.
But a 0.4% decrease is probably something you’re not going to notice that much. So taking advantage of sales is your best bet here.
If your electric bill was killing you last year, we’ve got bad news — the U.S. Energy Information Administration says that average wholesale electricity prices for 2024 in most areas throughout the country will be close to or slightly lower than in 2023. States on the West Coast will be hit the hardest as California, Oregon, and Washington experience the highest natural gas fuel costs.
That means if you want to actively combat energy inflation you’re going to have to be as diligent as possible. When it comes to energy costs, every little bit counts.
Maybe it’s time to switch out your lights for LED bulbs, which the US Department of Energy says use 75% less energy than incandescent bulbs. Are you washing clothes with hot water? Stop, Energy Star says that heating up water consumes 90% of the energy it takes to operate your washing machine. And of course, watch your thermostat and use fans when you can. We know it can get unbearably hot in the summer but if you want to keep that energy bill low, keep the AC off as much as possible.
Fighting against inflation where you can is all about being smart and filtering your decisions through the knowledge of where costs are highest.
