﻿The consumer price index, which measures changes in the cost of food, housing, gasoline, utilities,
and other goods, rose by 8.3% over the past 12 months. But that doesn’t tell the whole story.
Because the 8.3% is just an average of all the categories. When we dig deeper, we see that there
is quite a lot of variability across the different categories. So in today’s video, I’m going to
highlight 7 categories where inflation is actually hitting the hardest. And more importantly,
how we can best respond, so we can minimize its impact on our personal finances. Hi, if you are
new to the channel, my name is Tae from Financial Tortoise. Where we learn to grow our wealth, slow
and steady. The first category where inflation is hitting the hardest is food at home. With a change
in prices of 11.9%, this most basic consumer need is getting more and more expensive. And
this increase is most concerning given we all need food to survive. When groceries are close to 12%
more expensive than before, consumers need to cut back on other areas in order to make ends meet.
And when we dig a little further, we notice there are categories that are much higher than 12%.
Cookies are 12.6% more expensive now compared to the same time last year. Chicken at 19.3%. And
Eggs at 32%. Food companies are still recovering from the pandemic related plant closures,
worker shortages and shifting consumer demand, as people have been making more meals at home.
Food at home cost is hard to mitigate but there are few things we can do to lower the impact.
One is to buy in bulk from wholesale stores like Costco or Sam’s Club. These wholesale places most
often have the best deals because you are buying items in large quantities. I get all my chicken
from our local Costco and freeze them. This has not only helped in saving money, but meal planning
as well. I like to prepare the majority of my food ahead of time. Everything from breakfast protein
shakes to simple lunches made of broccoli, chicken and brown rice. If you’d like to learn more from
an expert, check out my friend Bri’s website - Frugal Minimalist Kitchen. She is a Registered
Dietitian and has some great resources around meal planning specifically. Another tip is to look at
generic brand store brands vs. name brands. When I shop at Costco, I most often purchase the Kirkland
brand product because it is much cheaper than the name brand. To be honest I wouldn’t be surprised
if they are sourced from the same location. Rising food cost is probably one of the most concerning
categories for the average American, but if we are smart with our shopping and plan out our meals,
I believe we can mitigate its impact. Next category where inflation is hitting the
hardest is furniture and bedding. Furniture is now 12.7% more expensive than they were
the same time last year. And it's not just cost. Shipping times are exponentially longer as well.
Manufacturers are trying to juggle cost increase for materials, supply shortages and longer wait
times to get those materials. Many working in the furniture industry are saying they’ve never seen
prices increase and supply chain issues quite like this ever. IKEA, the industry’s top cost leader,
has even announced they will be raising prices by about nine percent on average.
The company says its biggest cost increases are due to transportation costs and prices
for raw materials in North America and Europe. If you’ve been on the market for new furniture,
it might be wise to postpone that purchase for a little bit. It’s hard to live without food,
but many of us can live without a new sofa or a table if we can help it. We also won’t
be frustrated by the long wait time to receive our furniture. One furniture retailer has said
that what used to take 3 to 5 weeks to deliver is now taking up to 6 months. If we can live without
a new sofa for 6 months, I think we can stretch that out a little longer. The third category where
price is rising pretty significantly is in health insurance. Health Insurance is now 13.8% more
expensive than they were the same time last year. Though inflation plays a part in current rising
health insurance costs, this is one category where prices have been increasing for quite a while.
Americans spend a huge amount on healthcare every year, and the cost keeps rising. Premiums are
getting more expensive, deductibles are higher and drug prices keep on soaring. There are a variety
of reasons why this is happening but one big part is due to the fact that the U.S. population is
growing more unhealthy. According to the Center for Disease Control and Prevention , the CDC,
more than half of the U.S. population has at least one chronic condition, such as asthma,
heart disease, or diabetes. What’s more, recent data finds that nearly 40% of adults over 20 in
the U.S. are either overweight or obese, which can lead to chronic illness and inflated medical
spending. As the U.S. population gets sicker and more overweight, the risk of insuring the average
American goes up. And in turn, the higher the risk, the higher the cost of annual premiums.
Thus it is more important than ever for us to watch our health as we get older. We can do this
by making sure to eat healthy and get regular exercise. It is also important to get routine
check-ups with our doctors so that we can catch any potential health problems early on. Another
practical way to manage our healthcare costs is to look at insurance options to lower our premium.
Check with your employer to see if there are high deductible plans available. If you are relatively
healthy this might be a great option to lower your monthly costs. If you like to learn more about
high deductible plans where you can have a Health Savings Account, also known as HSA, check out my
video here to learn more. The next category where inflation is hitting the hardest is hotel rooms.
Hotel rooms are now 22.2% more expensive than they were the same time last year. Essentially,
after two years of industry devastation brought on by the COVID-19 pandemic, travel is officially
back. People are so eager to leave home that they are booking hotel rooms left and right,
and even at very high prices. And if you have been on the market for some summer travels,
I’m sure you are noticing this price hike as well. The bad news is that hotel companies will likely
keep the prices of hotel rooms high given they aren’t seeing significant resistance to these high
costs. So what can we do? We will either need to level-set our travel expectations or put in more
work to find affordable deals. Some strategies that people are using are to avoid popular
locations. Instead of trying to go to Hawaii and Florida like everyone else, maybe research less
traveled locations that've been at the bottom of your bucket list. And when booking, most fast.
With the ways that things are moving, you could get priced out pretty quickly. Another strategy
that I personally use to save money on hotel rooms is to book them using points. By leveraging travel
credit cards, my family and I haven’t paid for a hotel room for a very long time. If you’d like to
learn more about my favorite hotel credit card to implement this strategy, check out my video
here where I go over it in more detail. The next category where inflation is hitting the hardest is
in the vehicle category. Used vehicles are 16.1% more expensive and new vehicles are now 13.7% more
expensive than compared to the same time last year. The impacts of the COVID-19 pandemic,
which included manufacturing issues, supply chain interruptions, and labor shortages,
have completely changed the car market. Of course this can be said of most all industries today.
However, one specific aggravating factor has been the persistent shortage of computer chips.
Thankfully according to industry experts, the shortage is gradually improving and the hope
is that car prices will likely return to normal levels soon. Ideally by the end of 2022 or early
2023. So if you’ve been in the market for a car. Used or new, the recommendation is to wait if you
can. Try to eke out a few more months or years with your existing car. The longer you can put
off buying a car this year, the better. The next category where inflation is hitting the hardest
is in airfare at 37.8%. And the reason is pretty much identical to the reason why hotel rooms are
so expensive. Plus the crazy fuel cost I’ll cover in a bit. Many people are looking to travel after
2 years of being cooped up and airlines are struggling to increase their capacity to meet
demand. And it doesn’t look like the price will drop any time soon. During the Delta Air Lines
first-quarter earnings call, Delta President Glen Hauenstein acknowledged that despite their higher
fares, the airline is having no trouble selling them. And I personally have seen this play out in
real time when I was booking our latest family trip to Seattle. Within a period of one month,
I saw flight tickets from Orange County to Seattle go from average $400
dollars to now $800 dollars per seat. Again, if you want to find good deals on flights
you will need to do extra work this summer. A simple strategy is to track prices.
Google flights allow you to track flight prices and you can set price alerts by ticking the
“travel prices” box. You will then be notified via email of price increases and decreases.
The nice thing about google flights is that you can also see historic prices for your route,
so you know whether you’re potentially overpaying. And when you see prices that you are comfortable
with, book right away. I’ve noticed prices jump within a matter of days so the longer you wait,
the more expensive your plane ticket will likely be. The next category where inflation is hitting
is the one that most people are talking about. And that is gasoline at 48.7%. The US average for the
price of a gallon of regular gas is now almost $5 dollars a gallon according to AAA. And California,
where I live, has the highest average price, at $6.40 a gallon. Gas prices have been on the rise
all year to begin 2022, but inflationary pressures intensified following Russia’s invasion of Ukraine
in late February. As markets worried about the future of energy with global relations with
one of the largest producers, Russia, in turmoil. Oil and other energy prices soared. And according
to many experts, the worst is yet to come. With the summer travel season just getting underway,
demand for gasoline will just increase. If Russian oil shipments remain cut-off due to the war in
Ukraine, oil prices across all global markets will likely go higher. Some say the national average
price of gasoline could be close to $6 dollars by later this summer. So, if you have the ability,
this might be a good time to look at alternative means of transportation to get around, like trains
or buses. If there are no other alternate means of transportation in your area, you could also
look at carpooling with a coworker that might live close to your home. My wife carpooled to
work for many years and it was not only great in saving money, but for our marriage as well. It’s
impossible to predict when and how inflation will play out in the next months or years.
The Federal Reserve is increasing their interest rate in order to combat the rising inflation. And
the hope is that they can successfully do this without putting the whole economy in a recession.
However, we don’t want to just depend on Jerome Powell to get us through these hard times.
Let’s understand where inflation is hitting the hardest and use the strategies outlined in this
video to minimize its impact. Thank you guys for watching and until next time, all the best.