Inflation is cooling. At least, officially. The Consumer Price Index (CPI) came in at 2.9% for the past month of July, which is the lowest it has been since March 2021. That was 3 and a half years ago and it has certainly been a long 3 and a half years for many. Many in the media are celebrating the lower CPI numbers. And in some ways, they are right to do so. 2.9% is much better than the 9% official figure from June 2022. Prices are still rising (they almost always are), but not nearly as fast as they once were. But the toll that this cycle of inflation has taken on the lives of so many is something that I find is underreported these days.
Although it is true to its stated purpose, the CPI figure can be a bit deceptive when taken at face-value. It is calculated based on a moving average of total prices over the past 12-month period. So, this report indicates that prices in July of this year were about 2.9% higher than July 2023. Not bad. But do you remember how expensive things felt even in 2023? How about when compared with 2022? Or even further back to 2020, only four years ago?
The reality is that we have now endured several years’ worth of above-average inflation (the official rate that is typically targeted as normal is 2%). It adds up to a total cumulative inflation rate that has now hovered around 20% when compared with 4 years ago. If you look at the rate of individual categories over that time period, particularly food, energy and several types of insurance, the numbers are even higher.
This is significant because those key items, particularly food and energy, occupy a much higher proportion of spending for those who have less income to begin with. Families and households with lower income often have to spend close to a third of their money on groceries alone. And while higher-income families can, and often do, spend more in total dollars on food, it only represents about 8% of their income. Energy costs are another tough one. A gallon of gas around me costs about $3.40 on average right now and we all know that figure doesn’t magically change based on how much you make. It’s not hard to see why that’s tougher for someone making only $40,000 annually with a long commute compared with someone making $200,000 that drives just as much.
Ultimately, the nationwide inflation rate is not something any one person has immediate control over. Yes, even the president doesn’t have a magic button to raise or lower it. I try my best to focus this blog on ways you can control your own financial state and how to move closer to independence. It’s one of the reasons I don’t often discuss larger-scale phenomena, such as this, the nation’s unemployment rate or even income inequality.
Awareness. That is my only goal in writing this. If you feel like you’ve been making real sacrifices over the past few years just to get by and you can’t keep up, you’re not delusional. The numbers really have been stacked against you in a lot of ways over the past few years. Paying everything on time or even early really is a lot tougher when prices are coming close to doubling over a few years in some cases. And you are certainly not alone.
What Now?
Sometimes there are greater obstacles to face. The premiums you’ve had to pay at the grocery checkout or the gas pump over the past few years might have been rough and they probably feel unfair, but they are reality. As I said at the onset, the rate of inflation is slowing down, at the very least. It could certainly be better, but it could also be much worse. Continue to work in your own way towards financial independence, at your own pace. Don’t allow setbacks such as this to paralyze you into inaction. There is still much you can do to improve your situation, regardless of these larger economic circumstances. Focus on those things and work towards them in whatever way you can. You will be better off once you do.
You’re making great progress. Keep it up!
That’s all for now. Peace!
