Beware: Inflation is on the rise in 2025, and it’s about to make your life more expensive. The latest CPI report for January revealed that inflation has crept up to 3%, surpassing the Fed’s target of 2%. This unwelcome increase signals that interest rates may not decrease as soon as investors had hoped. In fact, the Fed is likely to hold off on reducing rates until inflation is more under control, which could mean mortgage rates sticking around 7% for the foreseeable future. While 7% might not seem exorbitant, it’s a significant increase from the past. Back in 1999, some homeowners were paying over 8% interest rates on mortgages.
But housing costs aren’t the only thing on the rise. President Trump’s tariffs are further driving up prices on everyday items. With a 25% tariff on steel and additional 10% tariffs on Chinese goods, expect to pay more for cars, appliances, construction, toys, and essentially everything you purchase. Furthermore, the executive order to impose 25% tariffs on imports from Canada and Mexico, although delayed until March, will undoubtedly impact our grocery bills. These tariffs affect key imports like energy, vehicles, machinery, and food, leaving consumers to bear the additional costs.
At the RB40 household, we’ve already felt the strain of rising costs. Despite living modestly, buying store brands, cooking at home, and sharing one car, inflation still poses a significant challenge. As prices continue to climb, we’re looking for ways to combat high inflation:
- Buy big items now: Before prices rise even further, consider purchasing major items like appliances and home renovations.
- Delay significant purchases: Hold off on big-ticket items like cars for at least four years. Hopefully, prices will stabilize by then.
- Adopt a modest lifestyle: Opt for budget-friendly travel within the US and explore national and state parks instead of international destinations.
- Continue investing: Given the uncertain economic climate, maintaining investments is crucial to stay ahead of inflation in the long run. The stock market remains a viable option for beating inflation, though it may be a bumpy ride.
In essence, while some may have hoped for a return to more affordable times, the reality is that rising prices and tariffs are reshaping our economic landscape. As consumers, we must adapt to this new normal of increasing inflation and make strategic financial decisions to weather the storm ahead. What actions will you take to combat inflation and secure your financial future in these challenging times? Stay informed, stay proactive, and stay prepared.
