Inflation Rate Climbs to 7% and Reaches 39-Year High
The cost of living isn't dropping anytime soon.
- The Consumer Price Index rose to the highest level in decades, and shows that inflated prices may be the norm for quite some time.
- Now is a good time to consider boosting income and budgeting carefully.
It's no secret that inflation has wreaked havoc on consumers since mid-2021. At some point late last year, many of us couldn't help but ask, "How bad can things really get?"
On Jan. 12, we got an answer. The Consumer Price Index, which measures the cost of consumer goods, rose to 7% in December. That's the most rapid inflation hike since June of 1982. And while that 7% uptick was in line with what economists predicted, it doesn't make that pill any less difficult to swallow.
Prices keep soaring across the board
Food prices rose 0.5% in December compared to November, and were up 6.3% year over year. That's the biggest hike in grocery prices since October 2008.
The cost of shelter also increased by 0.4% from the previous month, and 4.1% from the previous year. That marks the fastest pace since early 2007.
Used car prices also rose substantially, and are now 37.3% higher than a year ago. With the pandemic still raging, many people are seeking alternatives to public transportation. But right now, buying a car is far from affordable.
You might think that as an individual, you're pretty helpless in the context of inflation. But there are steps you can take to improve your financial picture as prices soar.
For one thing, start following a budget if you don't already. Having one makes it easier to track your spending and identify categories you can cut back on.
You can also shop more strategically. Food costs may be up, but if you plan out your meals and dine at home more often, you might actually save money despite higher price tags at the supermarket.
You can also look at boosting your income with a second job. One silver lining right now is that while living costs may be up, jobs are very much available. If you're willing and able to put in the time, a side hustle could be just the thing to boost your paycheck and cover higher expenses you're forced to grapple with. (On a related note -- if you have a car, consider driving for a ride-hailing service. Demand may be higher, now that public transportation is less appealing and used cars are so expensive.)
December's Consumer Price Index reading wasn't particularly shocking, given expectations. But it sends a clear message that higher prices may be here for quite some time. If you have savings to dip into, you may be in a pretty good position to ride out the current inflation wave. If not, it would be wise to get on a budget, rethink your spending, and do what you can to boost your income. It's far better than the alternative -- landing in debt, damaging your credit, and risking your financial security.
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