7 Signs Inflation Is Hurting Your Wallet in Ways You Do Not See
It’s normal to feel confused about certain money topics — particularly, when there is such a high volume of conflicting information. In fact, one recent survey by GOBankingRates shows that there are several money hot topics people feel clueless about.
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Of 1,008 respondents, 17% said they didn’t understand taxes, 13% found interest rates difficult to comprehend and 11% noted Social Security as a main concern. But more than any of those, nearly 38% admitted to feeling confused by inflation.
“Inflation is often a silent thief and its effects can significantly impact our financial health in ways we don’t easily recognize,” said Jonathan Feniak, general counsel at LLC Attorney.
Experts such as David Bakke at DollarSanity note that inflation can have a major impact on our daily lives.
“So the fact that inflation affects buying power is rather obvious, but I never understood it until it recently hit home,” he explained. “I’m a single guy on a normal budget, and I noticed that I was paying a few more dollars here on groceries, a couple bucks extra for gas and so forth. But I didn’t realize its full effect until I saw that I had little to no money leftover for entertainment towards the end of the month.
“Inflation is rather sneaky in some ways, because it slowly eats away at your finances until you see real-world consequences.”
To help demystify this money concept more, experts explain how inflation affects your day-to-day life and share some other telltale signs that it’s having a subtle impact on your wallet.
Your Grocery Bill Has Increased, but You’re Buying the Same
“Firstly, if you notice that your regular grocery bill is gradually increasing while your shopping habits remain the same, this can be the result of inflation,” Feniak said. “Simple goods such as milk, bread or eggs may become surprisingly more expensive due to the rising production and distribution costs. A simple $100 grocery budget might not stretch as far as it used to.”
Melanie Musson, insurance and finance expert with Clearsurance, agreed.
“Inflation is obvious when the average American goes to the grocery store and buys the same items they’ve been buying for years but has to pay 25% more than they did five years ago,” she said. “If your paycheck hasn’t kept pace with inflation, the grocery store trips will take a bigger percentage of your income, putting a strain on everything else in your budget.”
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You’re Experiencing ‘Shrinkflation’
According to Emma Collins, certified financial and trading expert at Trading, inflation can subtly erode your purchasing power in ways that aren’t immediately obvious.
“For instance, ‘shrinkflation’ is a common tactic where companies reduce the size or quantity of their products while keeping prices the same,” she said. “You might notice that your favorite cereal box feels lighter or your toiletries run out quicker than they used to, yet the price remains unchanged. This is inflation creeping in without a rise in sticker price.”
Another less visible sign, Collins said, is the reduction in service quality or features.
“For example, a subscription service may limit access or benefits without reducing the price, effectively making you pay more for less,” she said.
Amazon Prime adding advertising to its paid subscription is a recent notable example of this.
Similarly, Collins said that during periods of high inflation, businesses may cut corners in product quality to maintain profit margins, which means your goods might wear out faster or fail to meet previous standards.
Your Investment/Savings Returns No Longer Outpace Your Cost of Living
If the rate of returns on your savings or investments no longer seems to outpace your cost of living, Feniak said, inflation is likely playing a role.
“Your saved dollar today will buy less in the future if inflation rates exceed the growth rate of your savings,” he said.
Bakke added, “If you invest in a bond as a quick example that has a guaranteed 3% return, if inflation is at 3.5% you are actually losing money. Inflation may also affect your stock investments, although in slightly different ways. Normally, you won’t see this right off the bat.”
Collins also weighed in: “If your savings account interest rates do not keep up with the rate of inflation, your money loses value over time, reducing your future purchasing power. This is particularly painful for retirees relying on fixed incomes or interest from savings to manage their expenses.”
Elevated Housing Costs
Housing costs are another big indicator of inflation, said Rhett Stubbendeck, CEO and founder at Leverage Planning.
“Let’s say your rent went up by 10% when you renewed your lease,” he said. “That hike isn’t just inconvenient; it’s inflation eating into your budget. We’ve seen plenty of cases like this … and it’s why we stress the importance of planning for these increases.”
Home Repairs Are Costing You More
“If you are a homeowner, inflation can be seen in the rising costs of home repairs and maintenance due to increased labor costs and the price of materials,” Feniak said. “Regular tasks like lawn care or plumbing repairs might suddenly feel like big-ticket expenses.”
Transportation Costs Are Rising
“Transportation is another sector that’s been affected by inflation,” Musson said. “People feel the effects when they make a car payment with higher interest rates that accompany a higher purchase price.”
Additionally, she said, fuel is far more expensive than it was a few years ago.
Stubbendeck added, “Car prices, too, are climbing. If you were looking at a new car last year and suddenly see prices are 15% higher, that’s inflation at work.”
Insurance Premiums Have Increased
“Insurance premiums have more than kept pace with inflation,” Mussson said. “The increase in premiums has far exceeded inflation.
“Some people are opting for less insurance coverage to save money, but that puts them in a dangerous position where they could lose a lot of money following a liability incident with their home or car.”
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This article originally appeared on GOBankingRates.com: 7 Signs Inflation Is Hurting Your Wallet in Ways You Do Not See
