PERSO NAL F INAN CE

Inflation boosts U.S. household spending by $433 a month,

on average, Moody’s finds
https://www.cnbc.com/2022/11/25/inflation-boosts-average-household-spending-by-433-a-month-moodys.html

PUBL ISH E D F RI, NO V 25 20229:31 AM E ST

Greg Iacurci @ G R E G I A C U R C I

KEY POINTS

 Inflation raised spending by $433 a month for the average household, according to a Moody’s analysis of
the October 2022 consumer price index.

 The index increased 7.7% in October from a year ago, down from its recent peak but still near the highest
levels since the early 1980s.

People shop at a grocery store on June 10, 2022 in New York City. Spencer Platt | Getty Images

The average American household is spending $433 more a month to buy the same goods and services it
did a year ago, according to a Moody’s Analytics analysis of October inflation data.

While down slightly from than the $445 monthly figure in September, stubbornly high inflation is
stretching the typical budget.

“Despite weaker-than-expected inflation in October, households are still feeling the squeeze from rising
consumer prices,” said Bernard Yaros, an economist at Moody’s.
Consumer prices jumped by 7.7% in October from a year ago, according to the U.S. Bureau of Labor
Statistics. That rate is down from 9.1% in June, which marked the recent peak, and data suggests
inflation may cool further in coming months. However, October’s rate is still near the highest levels
since the early 1980s.

Here's the inflation breakdown for October 2022 — in one chart

These are some of the core categories, plus other items with notable year-over-year price changes.

Note: Items in bold represent major consumer price index categories. Table: Gabriel Cortes / CNBC Source: U.S. Bureau of Labor Statistics' Consumer
Price Index published Nov. 10, 2022
Wages for many workers haven’t kept pace with inflation, meaning they’ve lost purchasing power.
Hourly earnings fell 2.8%, on average, in the year to October after accounting for inflation, according to
the BLS.

The inflation impact on households’ wallets isn’t uniform, though. Your personal inflation rate depends
on the types of goods and services you buy, and other factors such as geography.

“We are seeing more signs that peak inflation is likely behind us, and this ought to provide some relief
for those demographics who have been disproportionately hurt from uncomfortably high inflation over
the past year, such as younger and rural Americans, as well as those without a bachelor’s degree,” Yaros
said.

The Moody’s estimate of inflation’s dollar impact analyzes October’s annual inflation rate and typical
household outlays as outlined by the Consumer Expenditure Survey.

‘All those little decisions’ add up

https://www.msn.com/en-us/money/news/whartons-jeremy-siegel-explains-why-he-thinks-90percent-of-inflation-is-gone/vi-AA14mXIS?category=foryou

WATCH NOW

VIDEO03:48

Wharton’s Jeremy Siegel explains why he thinks 90% of inflation is gone

Households can take certain steps to blunt the impact — and most are unlikely to feel good, according to
financial advisors.

“There’s no one silver bullet,” Joseph Bert, a certified financial planner who serves as chairman and
CEO of Certified Financial Group, told CNBC. The firm, based in Altamonte Springs, Florida, ranked
No. 95 on the 2022 CNBC Financial Advisor 100 list.
“It’s all those little decisions that add up at the end of the month,” Bert said.

First, it’s critical to separate fixed from discretionary expenses, said Madeline Maloon, a financial
advisor at San Ramon, California-based California Financial Advisors, which ranked No. 27 on
CNBC’s FA 100 list.

Fixed expenses are outlays for essentials such as a mortgage, rent, food, transit costs and insurance, for
example. Discretionary costs include spending on, say, dining out or vacations — things people enjoy
but don’t necessarily need.

University of Michigan's Consumer Sentiment Index

Note: Vertical lines indicate presidential elections. Chart: Gabriel Cortes Source: University of Michigan via FRED

There’s often less flexibility to cut fixed expenses, meaning nonessentials are the budget area where
households likely have to make cuts if they want to save money, Maloon said.

Households may need to ask questions, Maloon added, such as: Is that new car necessary? Can I buy a
used car or a cheaper model instead? Is a home remodel essential or something that can be put on hold
and reevaluated at a different time?

Americans can also consider substitutions: traveling somewhere closer to home instead of a more
expensive vacation destination farther away, or staying at cheaper lodging, for example. Or, perhaps
getting a haircut every eight to 10 weeks instead of every six.

They can also reassess monthly subscriptions — to clothing and streaming services, for example —
which can often serve as “money drains,” Maloon said. Some may be little-used but continue to suck
money from your account each month.

There’s no one silver bullet.

Joseph Bert

CERTIFIED FINANCIAL PLANNER AND CHAIRMAN OF CERTIFIED FINANCIAL GROUP

“If you’re continuing to live the same lifestyle, you’re paying more for it,” Bert said.

Every purchasing decision generally has an alternative, and people trying to save money can look for a
cheaper option to the extent possible, Bert said.

There are some ways households can save money on their fixed bucket of expenses, too. Relative to
grocery shopping, consumers can stock up on staples, shop with a food list, compare stores to find the
best deals and switch up what they’re eating, for example.

Consumers who commute to work and spend a lot on gasoline, for example, may be able to trim their
transit budget by using a price-tracking service, paying in cash, being more strategic about driving
schedules and signing up for loyalty programs.

It is important, Bert said, that people avoid funding higher costs with a credit card or via a withdrawal or
loan from a retirement plan.

“That’s the worst thing you can do,” he added. “You’ll pay a huge price for that in years to come.”

QUESTIONS

1. Which is the difference in inflation between last year and this year?
2. Are inflation rates the same for everyone? (explain)
3. What does Jeremy Siegel say about inflation? (video)
4. What is the difference between fixed expenses and discretionary ones?
5. How much is the household spending in Spain? Do you think it is fair or expensive? Has the
price raised here too?
6. Which things would you recommend to trim in the monthly budget?