Why Inflation Hits Some Americans Much Harder Than Others

Over the past two years, Americans have been hit hard by rising prices on everything from new cars to groceries. And with such wide-reaching inflation, it can be easy to think of everyone being similarly affected by the spike. But looking at the underlying data shows some stark divides in the effect of inflation on different groups. 

Read on to learn more about how prices aren't rising evenly across the board -- and what to do if your personal finances are more sensitive to inflation.

Renters vs. homeowners

One of the most obvious examples of how the past three years have unequally impacted Americans is the housing market. For renters, this period has seen rent payments rise substantially. Meanwhile, homeowners have been largely insulated from such a spike, and some may be paying less for their mortgage than they were pre-pandemic.

Much of the recent headline-grabbing inflation numbers are related to rents, which play an outsized role in the overall Consumer Price Index calculation. Recent inflation relating to rents  didn't actually peak until March 2023, when it hit over 8%. And when a renter's monthly payment is renegotiated, typically on an annual basis if not more frequently, their monthly rent could change dramatically from inflation.

Homeowners, on the other hand, are typically locked into a monthly mortgage payment over many years. So even in a period of record inflation, the price of keeping a roof over their heads remains largely the same for those borrowers. In the past few years, some borrowers actually lowered their monthly mortgage payments by refinancing at very low, mid-2020 rates. And while some homeowners are feeling the shackle of so-called golden handcuffs, homeowners have a significant advantage over renters in today's turbulent economy: the ability to wait it out.

Commuters vs. hybrid and WFH employees

There is another stark divide between those workers who must work on-site and those who can work from home. The evidence suggests that those with a commute have been subject to significantly higher rates of inflation than those who have more workplace flexibility.

Driving to work has become increasingly expensive, with inflation on gasoline hitting just shy of 60% last summer. And those that needed to buy a used car last year could expect to pay about 40% more than in the prior 12 months. When employees are spending so much more just to get to work, the cost of your commute could have a rippling effect throughout your budget.

Those who work a hybrid schedule or are entirely remote can reduce or largely avoid these expenses. Obviously, the monthly cost of gasoline is less for a non-commuter, but there are some other hidden savings. For example, a car driven less often will not need service as frequently, and may not need to be replaced as urgently as a commuter vehicle.

Steps you can take today to better face inflation

Renters, commuters, and many others are facing inflation higher than the CPI print. Fortunately, there are steps that can be taken today to help Americans feel more secure in their financial futures.

First, get back to the basics by building or updating your budget, and tracking how expenses change over time. Next, you may have to get creative. There are ways to lower your rent, including negotiating rates when renewing an old lease or before signing a new one. Commuters might consider carpooling with coworkers, using public transportation, or negotiating for a hybrid work schedule, if possible.

The sting of inflation has not affected all Americans the same. While some may be able to avoid certain expenses or be insulated from rising prices, not everyone has the same luxury. However, a well-thought-out approach to managing expenses can go a long way toward ensuring your family's financial security.