Inflation is the increase in the price of goods or services due to things like surges in product demand or production cost increases. In the past few years, inflation rates have been rising more than ever. It is expected that inflation rates are about to make the biggest jump in more than thirty years, so what can be expected from these rising prices?
Starting with the workforce, higher wages can be expected from ongoing inflation. In 2021 hourly wages rose 5.1%, a jump that made many workers happy. Higher wages bring more people to the working force and leads to lower unemployment rates. Looking again at 2021, with the increase in wages the unemployment rate dropped to 4.2% in November.
In terms of the cost of living, inflation leads to an overall higher cost of living. With an increase in hourly wages there is an increase in things like general goods, utilities, and rent making the cost of living rise overall. To combat this, social security will rise nearly 6% in 2022 in order to combat the growing cost of living.
Inflation affects an individual’s finances as well with increased interest rates. In fact the Fed’s New Dot charts suggest a rise in interest rates of 3% by 2024. People can also expect lower savings rates with a range between .01% APY and .10% APY, a range that is far below inflation rates.
With prices rising, there are many ways to protect yourself from the effects of inflation. For starters, 30 million Americans could be earning 70% more if they continued their education. Obtaining a college degree even later in life has the ability to increase your overall earnings in order to prepare for rising prices. Purchasing property is also a great way to secure a solid ROI with good rental bringing in a minimum 10%. Increasing retirement contributions can also prepare Americans for inflation in their later years. Even increasing the total amount invested by 1% each year could be beneficial.
Inflation is inevitable, it is important to take all necessary steps to prepare for the rise in the price of goods and the cost of living. Are you ready to protect your finances?
Infographic Source: Expensivity