​Where Does All The Money Go?

Chip Corley  |


Inflation, as reported by the Consumer Price Index (CPI), rose 2.4% over the past year. During this time, average weekly earnings also grew at a 2.4% average rate, according to Establishment data. In other words, the standard of living for most working folks remained the same year-over-year. Some people may find the status quo okay, while those trying to improve their lives by working hard and saving for their future do not. The only way for most Americans to get ahead in life is by making it happen. However, when someone who follows the rules of hard work, discipline, dedication and reliability falls short, answers are in order.

As depicted in the chart below, some components of inflation are discretionary expenditures, such as jewelry, which is a luxury item and not essential to well-being. Other items are necessary for a stable life, and in some cases legally mandatory. Car insurance is one of those obligatory non-discretionary expenses that is required by law to drive a car in the United States. The rising cost of car insurance is outrageous. The cost of transportation currently accounts for over 20% of consumer spending. If car insurance continues to increase at three times the rate of wages and salaries, it will be almost impossible for working folks to afford. Women’s dresses, men’s suits and cable TV service is increasing at twice the rate of wages. What gives? Certainly, individuals can postpone apparel purchases or forgo cable if things get tight. Prescription drugs, household repairs and attorney’s fees are not something that can be put off. Let’s just hope that our pals in Washington can cut taxes, and put more money in the hands of those who really need it-each and every one of us!

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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