16 Painful Ways Inflation is Squeezing The Middle Class

Is your wallet leaking? Bank account draining faster than usual? Your shopping habits haven’t changed, but lately, it seems like money goes out quicker than it comes in. If this sounds familiar, you’re not losing it.

Here are 16 reasons your paycheck doesn’t stretch as far these days — and how to beat back inflation.

That 2005 Corolla you’ve had since college? You might be stuck with it a little longer. New vehicle prices are up 10.4%, according to the Consumer Price Index. Even pre-owned vehicles are 6.6% more expensive than they were last year.

The global microchip shortage also has automobile manufacturers at a standstill, driving the supply-demand mismatch that’s behind the price increases.

Healthcare has never been cheap for consumers, but hospitals and providers are feeling the heat now, too.

Because of the way insurance rates and premiums are calculated, many medical facilities have thus far absorbed rising labor and operating costs. That could change, though. And if it does, you might have to foot the bill.

Anyone with so much as a five-minute ride to work knows that driving has become expensive. While gas prices are finally starting to decrease, they hit record highs earlier this year.

We can thank falling oil prices for the relief at the pump, but only time will tell if that relief is temporary or permanent.

In December 2022, the average hourly wage in the U.S. was $32.82, according to the U.S. Department of Labor. But when adjusted for inflation, the average real wage — or how much you can buy with that pay — was only $11.01.

That’s because salary increases aren’t keeping up with inflation, leaving the middle class trying to race the economy with a weight on one ankle.

Over the past two years, a low housing inventory, low interest rate double feature caused a real estate boom that drove prices skyward.

The housing market is gradually slowing down, but that doesn’t automatically equate to attainable homeownership, as the median home price recently exceeded $400,000 for the first time ever. 

The increase in the cost of living means you might have less money available for a down payment. Rising interest rates could also keep you from affording a mortgage at all.

What do you do when you want your own place but you’re not in a position to buy? You rent, of course. And what happens when more and more people are forced to rent instead of buy? Rental demand spikes and rental prices follow suit.

Exacerbating the problem is the end of COVID-19-related rent protections. Landlords aren’t limited by rent ceilings anymore, and they’re capitalizing on the surplus of tenants scrambling for an available rental.

6 Legit Ways To Help You Pay Your Rent

One particularly long-lasting byproduct of inflation is debt accumulation. When funds run low, you might turn to loans or credit cards to bridge the gap.

This isn’t a bad strategy in and of itself, but any debt you incur while interest rates are high will cost you more over time, especially if you can’t pay it off right away.

Just in time for travel restrictions to ease, travel costs are up across the board. In fact, Destination Analysts reports that only 28% of Americans think traveling is worth the cost right now.

Thankfully, there are ways to cut travel costs without sacrificing experience. To save on fuel or airfare, book a staycation at a local hotel. You can also use one of the best travel credit cards to get discounts or cash back on your trip.

That financial squeeze you’re feeling now could affect you for a while to come. The tighter your money gets, the less you’ll be able to invest.

That means you’ll miss out on the benefits of an extended time horizon and compound interest, and you might have to play catch-up with your investments later.

Get ready for a cold winter — natural gas prices surged 70% from the end of June 2022 to reach 14-year highs. While you probably will keep seeing the impacts of this increase over time.

Do what you can to prepare now. Explore budget billing options with your energy provider.

Thanks to ongoing supply shortages and increased food costs, restaurant prices are up 7.6%.

Consumers who are already pinching pennies may not be willing or able to pay a larger tab when they go out to eat. That’s bad news for servers who rely on tips from generous customers to get by.

Think you’ll save money by cooking at home? Not in this economy. Grocery costs are up by 13% — nearly double the increase we’ve seen for takeout and dine-in options.

That doesn’t necessarily mean it’s cheaper to hit the drive-thru, though. Compare food prices at different stores and restaurants in your area so you can eat as healthily as possible without overspending.

Dreaming of going back to school to finish that degree? Getting ready to send off your high school grad for their freshman year? Make sure you’re sitting down when you get your tuition bill.

Between pandemic-era tuition freezes expiring and inflation impacting nearly every industry, the Washington Post reports that the cost of higher education rose by as much as 7% at some institutions.

If you have young kids, you might already be facing school fees head-on. Even toddlers pay tuition, after all.

Results from a 2021 Care.com survey revealed that American families now pay anywhere from $221 to $694 a week on child care. That’s partly because daycare facilities are losing staff to other professions, and many are shutting their doors for good. For parents, that means fewer options and higher prices.

People food isn’t the only supermarket staple getting more expensive. With pet food and vet costs both up about 10% from last year, pet ownership as a whole is less affordable than it used to be.

Since your fur baby can’t get a job, it’s up to you to cover their expenses. Use free or low-cost vaccine clinics to save on routine care, and turn old household items into pet-safe, budget-friendly toys. (Word on the street is old t-shirts are great for tug-of-war.)

Savings accounts exist precisely for times like these. The problem, though, is that savings accounts are much easier spent than replenished.

If you’ve dipped into your emergency fund to cover expenses, make a plan to replace the money you’ve taken out. Otherwise, you’ll leave yourself vulnerable to another financial emergency — this time with no backup.

Inflation is at a 40-year high, and it seems like everything from basic necessities to small luxuries cost a fortune.

All signs point to prices continuing to trend upward at least into next year, but there’s no way to know for sure when the economy will stabilize. In the meantime, it might be helpful to use contingency-based budgeting to guide your spending and boost your bank account.

Plan out where your money will go (and come from) if the cost of living improves, gets worse, or stays the same. That way, you can focus on staying afloat in the short term without compromising your financial health in the long term.