Inflation: Everyone Experiences It Differently

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Inflation and rising prices erode your purchasing power.

The national inflation rate ended 2022 at 6.5%, after peaking at 9.1% in June—a rate not seen in more than 40 years. The inflation rate had averaged 4% from 1972-2022, according to the US Bureau of Labor Statistics.

No one can be sure how long inflation will stay elevated above historical averages but it could stick around longer than anyone would like. Regardless, not everyone experiences inflation in the same way. You may find your expenses rising faster than your friend in another part of the country or more slowly than your next-door neighbor.

Since everyone experiences inflation differently. Fidelity’s analysts parsed mountains of government data on inflation rates and spending patterns.

Fidelity identified 4 key factors that can make inflation different for everyone.

  • Where you live: Inflation varies widely by region. The northeast tends to have lower inflation than the national average, while the southeast and mountain west tend to be higher.
  • How old you are: People spend money on different things at different stages of their lives. We used data from the US Bureau of Labor Statistics to inform how people in various age groups tend to spend their money.
  • Do you rent or own? If you’re renting you aren’t insulated from price increases as much as you are if you own, and especially if you’ve paid off your mortgage.
  • How much do you drive? The price of gas was a huge driver of inflation in the past year.

Answer these 4 questions and get an estimated inflation rate that may better reflect the impact of rising prices on people like you than the national headline inflation rate. Knowing where you stand can help you plan.

With the price of food and energy rising fast, inflation is already hitting most Americans right in the budget. A recent analysis from Moody’s Analytics found that the average household is spending almost $460 more per month because of inflation. As you look for ways to tighten your belt, keep an eye on your budget. Fidelity suggests spending no more than 50% of your take-home pay on essential expenses like food and housing, to give you room to save for retirement, plan for short-term goals, and spend on nonessentials.

References:

  1. https://www.fidelity.com/learning-center/trading-investing/inflation-quiz
  2. Moody’s Analytics, “Fed isn’t popping champagne,” FinancialMirror.com, 08/12/2022, https://www.financialmirror.com/2022/08/12/fed-isnt-popping-champagne/
  3. https://www.fidelity.com/learning-center/personal-finance/how-to-beat-inflation
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