Inflation appears to be one of those financial statistics that on paper is defying gravity. According to www.inflationdata.com, the inflation rate last year was less than one percent and in some months of the year it was actually negative. For many of us, the inflation numbers may say that prices are staying flat or even going down, but when we hit the check out register our wallets tell us another story. While some prices may stay flat in 2016, here is your smart money moves guide to six things that will cost you more money in 2016.
- COLLEGE- While inflation has been hovering around an all-time low, many of the major colleges and universities have increased costs in the five years in the 6% to 7% range. Just check out this historical cost of college from the University of Tennessee showing just how steep the increases have been over the past thirty years. http://onestop.utk.edu/files/2015/10/tuition_fees_history.pdf. Since this is about supply and demand, I don’t see college being FREE anytime soon as some politicians suggest it will be for all of us.
- RENT- In 1963, home ownership in America was about 63%. While this number vascillated up and down until it hit an all time high in 2005 at 69%, the last decade has seen home ownership drop down to an historic low at 61% (source: wsj). This fact highlights the trend that more people are renting in America. This effect is happening because millennials are delaying when they buy a home (if they buy at all) and more senior citizens are giving up their homes and moving into assisted living facilities. Cities, including New York and San Francisco, are white hot when it comes to increasing rent, but many other growing cities in American are seeing rents spike substantially as we head into 2016.
- ORGANIC FOOD- As we learn what foods are truly good for us, our passion for eating healthy with organic food goes up every year. While trying a basket of organic food from a local grower can save you money from going to one of the major chain stores, the cost of organic food will be up 5% to 10% more in 2016. Try to go shopping only once per week as picking up the fresh prepared food several times per week can really kill your budget.
- LOANS- Since the fed raised interest rates albeit only a quarter of one point, you will absolutely see the cost of borrowing on credit cards and lines of credit go up in 2016. Credit cards will spike up by 1% to 2% in 2016, and many other loans tied to LIBOR will spike up over the next several months.
- TECHNOLOGY- Does it bother you at all that people seem to be on their cell phone no matter whether they are at the restaurant with their family or sitting in a crowded lobby at the doctor’s office? The need for faster, better, and smarter technology drives prices through the roof. While some existing technology may come down in price, the sheer volume of technology coming at you will increase your overall family budget. Did you ever think your children would need a hoverboard? Did you think you would need a smart thermostat system at home? What the heck is a bitmoji (I did one – check out the app). Your technology costs will be going up again this year in 2016.
- HEALTH INSURANCE- There is a lot of speculation on exactly how fast the cost of insurance is going up. Remember, that you can’t just look at the premium but you also need to consider what the insurance companies are doing to the policies. To really compare costs apples to apples, you need to have the same exact policy. The last several years, I have witnessed in my own business that the insurance companies not only raise costs substantially, but they don’t offer the same plan as they offered you last year. Expect for most families that can afford health insurance that costs will be up more than 10% again this upcoming year.
You will see other costs go up in 2016 including automobiles and travel costs, but keep an eye on these six so you can plan smart money moves for the year ahead of you.
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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.