Despite some recent relief from soaring consumer prices, I’m glad 2022 is almost over.
‘Why is everything so expensive?’ The year of inflation frustration.
The Federal Reserve tried to fight the cost increases by aggressively raising interest rates, a plan that will continue into 2023. Unfortunately, this also drove up the borrowing costs for debt on credit cards, mortgages and loans.
“Between higher rates and higher prices for just about everything, it has been a nasty combination for borrowers,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.
When people ran out of savings, they often began leaning on credit cards to cover household expenses, McBride said.
Each year, Google releases its “Year in Search,” a lengthy list of top trending searches. Here are the top “why is/are … so expensive” search questions in the financial category for Americans in 2022, according to Google.
1. Why is gas so expensive?
3. Why is diesel so expensive?
4. Why are eggs so expensive?
5. Why is saffron so expensive?
7. Why is everything so expensive?
9. Why is California gas so expensive?
10. Why are cars so expensive?
The top three economy-related Google searches for how to save were:
1. How to save on gas
2. How to save on electric bill
Here’s what some financial experts say about how inflation affected people’s pocketbooks in 2022 and how to prepare for more tough times in the new year.
Christine Benz, director of personal finance for Morningstar: “The biggest personal finance issue in 2022, in my opinion, was inflation. We hadn’t seen anything like it in decades. My hope is that inflation is moderating, but it’s unrealistic to expect prices to go back to pre-2021 or -2022 levels.”
Her advice: “The year 2022 underscored the importance of holding at least some cash investments, especially for retirees and others with near-term spending coming up. Holding emergency reserves is especially important if we encounter a recessionary environment. While the employment picture is still quite strong, we could see some weakening there, and job loss is one of the key reasons people should hold at least some cash.”
Eric Bronnenkant, head of tax at Betterment, a digital investment advisory firm: “2022 was a year of anxiety for many in the economy and financial markets. Job losses and below-inflation raises have only contributed to the uncertainty.”
His advice: Stay focused and disciplined for long-term savings goals. If the United States is headed for a recession, you may need those emergency funds.
Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling: “I recently overheard someone describing 2022 as a decade worth of events crammed into a single year. Avoiding debt became more of a challenge for families living close to the edge financially, and for some, it was a losing battle.”
His advice: Do the best you can to get rid of credit card debt that you may have accumulated during the year. “Credit card balances have returned to pre-pandemic levels at a time when it’s more costly to carry debt from month to month,” McClary said.
Rossman: “Inflation and higher interest rates were the dominant financial themes of 2022. They’re two sides of the same coin. The highest inflation readings since the early 1980s forced the Federal Reserve to get really aggressive with interest rate hikes, pushing credit card rates to their highest point ever and auto loan rates to their highest level since 2011.”
Rossman pointed out that the average 30-year fixed mortgage rate briefly surpassed 7 percent in the fall, the first time it had reached that high in 20 years.
There were some silver linings this year.
“The job market has been very strong,” Rossman said. “In 2022, we enjoyed some of the lowest unemployment readings in 50 years. Higher savings rates are one good thing that has come out of this higher-rate environment.”
The highest FDIC-insured savings account is yielding just over 4 percent.
“Even though things haven’t felt great, the economy has still grown in 2022.” he said. “Consumer spending has been remarkably resilient.”
His advice: Keep the fundamentals in mind.
“It has been a volatile year financially, and we’re expecting more of the same in 2023,” he said. “It may be easier said than done, but to the extent possible, look for ways to boost your savings and pay down debt.”
Source: WP
