Personal Finance & the Rising Cost of Living (2024)

FAQs

Personal Finance & the Rising Cost of Living? ›

This cost of living creep means that consumers are spending more money to afford the same amount of goods or services as they did in the past. About 66% of those surveyed said the rising cost of living is holding them back from meeting their financial goals.

The cost of living refers to the money needed for essentials like housing, food, taxes, and healthcare in a specific location and time. It is often used to compare the expenses of living in different cities. Higher living costs, like in New York, require higher salaries for affordability.

Demand-Pull Inflation

Consumer confidence tends to be high when unemployment is low, and wages are rising—leading to more spending. Economic expansion has a direct impact on the level of consumer spending in an economy, which can lead to high demand for products and services.

U.S. Household Debt Is at an All-Time High

The total household debt of $17.3 trillion entering 2024 is a new high for the U.S. The largest increase in any category was credit card debt, which swelled by 16.6% between Q3 2022 and Q3 2023, the most recent term for which federal data was available.

Home / Economy / Articles / How are Americans doing financially? More than a quarter of US adults are struggling financially. 72% of Americans reported “living comfortably” or “doing okay,” according to December 2023 data from the Federal Reserve.

The cost of living is expressed as a composite index score, based on six weighted categories: housing, utilities, groceries, transportation, health care and miscellaneous goods or services. A composite score of 100 is the national average, and any score higher than 100 is above average.

Supply chain bottlenecks and soaring demand for goods and services following the re-opening of the economy after the pandemic-related lockdowns sent prices for goods and services skyrocketing to four-decade highs last summer.

Over the past year, the rise in the cost of living has been most brutal for those with lower income, according to a new report.

Reduce Discretionary Spending: Evaluate your discretionary spending habits and identify areas where you can cut back without sacrificing essential needs. This might include dining out less frequently, reducing entertainment expenses, or finding more cost-effective leisure activities.

What is the average debt per person in America? ›

The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans.

According to Experian, average total consumer household debt in 2023 is $104,215. That's up 11% from 2020, when average total consumer debt was $92,727.

Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.

Those living paycheck to paycheck devote their salaries predominantly to expenses. The phrase may also mean living with limited or no savings and refer to people who are at greater financial risk if they were suddenly unemployed or faced another financial emergency.

Rising feelings of financial insecurity: Just 1 in 4 (25%) Americans say they are completely financially secure, down from 28% in 2023. Whereas 72% of Americans indicated they were not completely financially secure in 2023, that number has now risen to 75% in 2024.

Cost of living indexes have a baseline of 100, with figures above or below representing a city as more expensive or less expensive. An index below 100 means the region or area is less expensive to live in than the national average.

Simply add up all of your monthly fixed expenses, like rent or a mortgage payment, and your variable expenses, such as groceries and gas costs. Also factor in occasional but expected purchases, such as new tires. The resulting amount, assuming you aren't going to debt every month, is your cost of living.

The expenses that factor into cost of living can include housing affordability, transportation expenses, food prices and entertainment costs. Cost of living is also tied to income, as salary levels in a geographic area are measured against these expenses.

Cost-of-living adjustments (COLAs) are periodic increases in wages or salaries to account for inflation and rising living expenses. Business leaders can incorporate COLAs into compensation packages to provide employees with incremental raises that keep pace with the cost of living in their respective areas.