Most of us face a year of tighter budgets.
- Inflation has reached 7.5% from the previous 12 months, a 40-year high. This will cost the average household $3,300 more per year for basic necessities.
- With gas prices hitting all-time highs, Americans can expect to pay $800 more per year to drive.
Soaring inflation and gas prices are hurting Americans. Many households, especially those with low to moderate incomes will feel the pinch. Americans can expect to pay close to $4,100 more per year, or $340 a month due to the rapid rises in costs.
Inflation has reached 7.5% from 12 months ago, a 40-year high. (Compare to just 2.1% inflation from 2018 to 2019.) As a result, Moody’s Analytics estimates that inflation will cost the average American household around $3,300 more per year. This additional increase in costs includes basic goods and services such as food, utilities, and housing.
On top of that, gas prices have hit an all-time high, reaching $4.33 per gallon earlier in March. A year ago, the average price of a gallon was $2.87.
The United States Department of Transportation Federal Highway Administration (DOT) states that the average person drove about 1,200 miles per month in 2019. The average mileage for cars is about 24 mpg, meaning most American drivers use almost 600 gallons of gasoline a year. One year ago, that would have been about $1,700 a year. With the gas price hike, at that same number of miles, the cost increases to around $2,500.
Add all that up, and the average American will pay about $4,100 more this year than last year. This comes out to about $340 per month.
What options do you have?
Unfortunately, prices are expected to remain high. The extra pinch may strain your budget, so it’s important to track your money. Use a budgeting app to help you understand your spending habits, track expenses, and see where you can cut back. There may even be some categories you can eliminate.
When it comes to driving, the Department of Energy recommends avoiding aggressive driving — rapid acceleration and braking can lower your gas mileage by 15% to 30%. Gas mileage also decreases when you drive over 50 miles per hour. Every 5 mph you drive over 50 mph translates to spending an additional $0.30 per gallon of gas (at $4.32 per gallon).
Also look into credit cards with cash back rewards for gas purchases. Many gas station chains offer loyalty programs. These rewards and loyalty programs can help offset the dramatic spike in gas prices. By being more mindful of your spending habits and driving more efficiently, you can better deal with the price increases.
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