Janet Alvarez - CNBC
You are not imagining it.
Not that I have the feeling that everything is more expensive these days: the reality is that prices are accelerating at their fastest rate in 13 years.
This inflation doesn't just affect the price you pay at checkout.
It can also have an impact on your major purchases, investments, and other expenses.
And for communities of color and people with lower incomes, that impact may be magnified by higher levels of debt and structural unemployment, both of which can make inflation a big problem.
Here's how inflation can affect you and what you can do about it.
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According to financial expert and Torch Enterprises CEO Dr. Pamela Jolly, although inflation can be felt strongly,
"people who have low incomes or have inconsistent income streams will feel the greatest impact
.
"
Although the inflation rate rose to 5% in May, the highest year-on-year record since 2008, not all consumer goods accelerated at the same rate.
The biggest price increases were concentrated in energy, commodities and transportation (gasoline, for example, increased 56% over the past year, while used cars and trucks increased almost 30%).
That means that, in at least some cases, smart consumers can take certain steps to minimize the impact of inflation on their pockets.
Here are some alternatives to avoid the most significant impacts of inflation on your purchases.
Inflation in food
While food outside the home has seen average price increases of 4%, food inside the home has increased by a more modest 0.7% year-on-year.
Choosing to eat at home has always been cheaper, but current inflation rates underscore that even more.
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Meat, poultry, fish and eggs have seen some of the most substantial price increases, so limiting your purchases can lead to modest savings.
Cars and gasoline
Although the price of new vehicles increased 3.3% over the past year, used cars have increased almost 30%.
Given the relatively low interest rates, and depending on your particular financial circumstances, you may be able to get better deals on new vehicles now.
But gas prices have also risen a whopping 56% (due, in part, to the cyberattack on the Colonial Pipeline, whose impact on prices was transitory), and transportation services rose 11%.
Expect driving and flying to cost more these days.
Home Furnishings vs. Healthcare Inflation
Comparing the costs of health care and home furnishings is like comparing apples and oranges, but it presents an illustrative example of the uneven nature of inflation.
Home furnishings increased 1.9%, the largest increase in many years;
similarly, the costs of household services also rose substantially.
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Health care costs decreased slightly or remained stable.
That means the best investment, if you have a choice, may be to catch up on overdue medical care, rather than home maintenance or decorating.
Longer-term impact of inflation
The question of whether this outbreak of inflation is transitory and linked to the COVID-19 pandemic, which is slowly being left behind, or whether it is structural and of longer duration weighs on the minds of many economists, and was taking a toll on the economy. market this week, as the Dow Jones Industrial Average had its worst week since January.
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Dr. Jolly believes that these are unusual times that require serious thought about our financial decisions.
“We are entering a period in which wealth creation requires greater financial strategy, from consumption levels to building sustainable pathways beyond retirement that include savings and investments.
This uncharted territory is fertile ground for both the financial industry and our most vulnerable communities. "
US Senator Ron Johnson, Republican of Wisconsin, during a press conference on inflation on Capitol Hill in Washington DC on May 26, 2021 Drew Angerer / Getty Images
Jolly says that Americans need to stay on top of their investments, better understand debt management strategies, and improve their financial literacy to manage their financial futures during this inflationary period.
For example, if interest rates go up, home ownership can become more expensive.
Credit card fees can also go up.
Debt service or mortgage or rent payments can become more onerous if wages do not increase at the same time.
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For that reason, Jolly advises doing everything in your power to prepare to handle these fluctuations, including building stronger relationships with your banks or financial institutions.
This is especially vital for communities of color.
As the coronavirus pandemic taught us, people of color are more vulnerable to that financial shock, in part because there were fewer community banking relationships. Forging these links now can help disadvantaged communities withstand the impact of inflation.