Got an Extra $11,500? You’ll Need It to Keep Up With 2022 Prices
Even if inflation slows in coming months, Americans will have to spend thousands more in 2022.
Elizabeth Renter Aug 17, 2022
Rising prices (i.e., inflation) are everywhere you look — on the news, at the pump and in the grocery store. We notice these changes when we reach for our wallets, but it’s difficult to grasp what an extra dollar here or several dollars there mean over the course of several weeks, months or an entire year.
With prices up 8.5% year over year, household spending — that’s yours and mine — stands to rise by several thousand dollars. Even with the Federal Reserve’s attempts to control inflation through interest rate increases, it’s unlikely these prices will fall dramatically. This climb isn’t just a tank of gas or a few additional dollars at the store. For some people, it could be an entire paycheck every month.
Using inflation and annual spending data from the U.S. Bureau of Labor Statistics, we looked at how spending in 2022 will differ from 2020, the last full year when inflation was relatively stable. We chose a handful of categories that many, if not most, Americans spend money on, such as food and electricity. The inflationary impact is remarkable.
Household expenditures could rise by $11,500
In all of 2020, American households spent $61,300, on average. This number includes everything we spend our money on: housing, food, entertainment, clothing, transportation and everything else. In 2022, it stands to reach $72,900, a difference of more than $11,500 if consumers want to maintain the same standard of living. Keep in mind, this is an average, a number that represents an approximation across all Americans, but one that’s exact to a very few. Those who earn (and therefore spend) more will see more dramatic dollar increases. Those who earn less may see less dramatic dollar jumps, but the impact of these rising prices could be more significantly felt.
It’s worth calling out — spending was a bit unusual in 2020. People spent less on commuting, child care and entertainment, for example, and more on home improvements. It’s a safe assumption that people will spend less in certain categories this year too, if for no other reason than avoiding high prices. This is primarily why we think spending in 2022 will be more similar to 2020 than 2019, for example, another year for which such spending data was available.
We can all likely agree that $11,500 is a lot more money to spend in a single year, but grasping what big numbers like that mean in practice can be difficult. Per month, you’re looking at close to $1,000 more. For many people, this is an entire extra rent or mortgage payment.
Average monthly spending changes, 2020-2022
+$961 Total monthly expenditures.
+$70 Household utilities.
Source: NerdWallet analysis of 2020 Consumer Expenditure Survey data and Consumer Price Index from the Bureau of Labor Statistics.
Across all the spending categories we examined, groceries, shelter and gas stand to rise the most. Throughout all of 2022, if inflation doesn’t slow considerably, we can expect to spend $1,200, $1,400 and $2,500 more on these categories, respectively.
Click here for a table of all anticipated spending changes.
LFC Comments: We suggest going to their website to see more of their excellent analysis. We calculate that the inflation is more like 18.7% rather than the government’s misinformation of 8.5%.
Increase in household expenditures: more than $11,500
2020 American Household expenditures: $61,300
2022 Projected Household expenditures: $72,900
% increase due to inflation: ~18.7% ($11,500 / $61,300)