DENVER (KDVR) — Signs point to a national belt-tightening in 2022.
The U.S. Federal Reserve raised interest rates Wednesday for the first time since 2018. The move is designed to tamp down on national inflation, which has been steadily rising for a year and is now at its highest rate since the 1970s.
Prices will continue climbing. The Federal Reserve says this interest rate bump won’t cure inflation overnight. In a note, its economists project inflation will continue at higher-than-normal rates until early 2023 at the earliest.
Signs are already pointing to some consumer pushback against higher prices. Retail spending slowed in February, and major retailers such as Macy’s have been reporting falling sales as a result of price hikes.
If Coloradans are having trouble keeping up with inflation, a change in habits can go a long way. Consumer spending data shows several nonessential areas ripe for cost-trimming.
Most of an American household’s spending goes to necessities, according to consumer expenditure data from the U.S. Bureau of Labor Statistics. Eighty percent of spending goes to housing, transportation, food, insurance and health care.
Unnecessary travel is the simplest way to cut down on transportation costs, which are the most flexible of necessary spending. A weekend day trip to Mt. Evans from Denver, for instance, would cost roughly $13 in gas at current prices and average gas mileage. Trimming just one mountain trip per week could save $700 a year.
Trimming unnecessary expenses elsewhere can save even more.
From 2015 to 2018, households spent an average $59,000 a year. Of that, about $9,000 was spent on nonessential items like food away from home, entertainment, alcohol, tobacco, smoking supplies, apparel and services.
The single biggest category is food away from home. American households spent an average $3,250 a year on take-out, dine-in and delivery food.
Surveys find a wide range of answers, but generally, Americans eat out 10-15 times a month, or roughly $10 per purchase on a yearly average. One of the simplest and most effective ways to trim monthly expenses is to make your food at home. Holding yourself to a single meal out can save just under $200 a month.
Entertainment is the second-largest discretionary spending bracket at $3,000 per year. Cutting these expenses to once a week can save another $150 a month.
At $1,800 a year, clothing and related services are the third-highest. Pressing your own clothes, buying thrift and learning to repair or tailor your own clothing can save hundreds.
