Inflation Invasion: Why it Costs you More Money Every Day

 

Greetings to all those who track budgets and go grocery shopping! You have to love inflation—well, you don't—but you have to be aware of it. Have you noticed your grocery bills, gas expenses and rents going up more than ever before? The answer is yes. Inflation is back and no, it's not some buzzword economists whisper about on Wall Street. It's real, it's rampant. Let's take stock to better understand potential reflections inflation can have on our daily lives and the future of the American economy.

What Is Inflation?

So what is inflation? Simply put, inflation is the rate at which the general level of prices of goods and services is rising, and subsequently, purchasing power is falling. Basically, it's how much more you're going to have to pay for your daily coffee or monthly rent next year than you used to. Economists typically measure inflation through the Consumer Price Index (CPI), which tracks changes over time in the price paid by consumers for a variety of goods and services, including food, clothing, rent, transportation and so forth.

Recently in America, inflation reached 2.7% in June 2025, up from 2.4% in May 2025, meaning the average American is paying 2.7% more for certain goods and services than they were the year prior. While 2.7% isn't horrible when looking over the course of multiple years, 2.7% gets compounded across every line item on your budget and that's a lot more money than you'd be used to spending in a year. Furthermore, if your salary doesn't increase at least 2.7%—if not more—you're losing purchasing power—and unless you received a significant raise last year, I doubt your income increased that much.
But Where Is This Inflation Coming From?

But where is all this inflation coming from? The biggest contributors are housing, energy, and food. First housing. Rent costs are going up. In June, June alone, rent increased by 0.2%. Year over year, housing has gone up 4%—which is more than the year over year increase of 2.7% for all other indices. Suppose you've owned a home with the average national inflation increase. In that case, you will not be spared either as property taxes are going up and home maintenance is going up as expenses trickle down from real estate owners to citizens, whether renting or owning. Meaning, everyone is stuck on this one.

Second, energy. Energy is going up. Gas has gone up 1.0% while energy has gone up 0.9% in June across the country—another tremendous expense that isn't avoidable as we all need gas at some point. Without gas in our cars, we cannot drive; without driving, we cannot live our day-to-day lives. This blip cuts deep to the core of vulnerability. Then food—a grocery items increased by 0.3% in June—again, seemingly small yet does it not hurt families to feed themselves? Every single penny matters every month, every week, every day at the supermarket as one tries to stretch a dollar as far as it goes.

Finally, tariffs. While this category is not as visible or punitively felt in the short run, thanks to President Trump and his refusal to follow expected trade agreements and settlements of tariffs against imports and exports to avoid debt and overspending amounts, certain goods may be expected to increase in price down the line in years from now as companies raise prices of goods better to adjust to lost revenues from taxes on shipping goods in and out of the United States. Unfortunately, economists believe that these tax increases will raise inflation levels to 3.5% by December 2025 if not sooner when people get used to the price change. So inflation is only going to go up.
How Is This Impacting You Everyday?

Let's put this into perspective. If your grocery bill per month is $600, 2.7% is $616.20. Okay, it's not that bad. But over the course of the year, that's an increased cost of $194.40. If you spend $50 to fill your gas tank, 1.0% is $50.50 to fill the tank. Okay, not financially devastating on a singular basis, but compounded across other expenses throughout a whole budget, it's death by a thousand cuts.

Where else are people impacted? In omitted decisions. You're not going out to eat as much. That vacation this year (or next) won't be realized. People are picking up extra hours at their current jobs or getting second jobs to make ends meet. When inflation impacts daily goods, it negatively impacts what people need the most—and those items cannot easily be extracted from the budget.

For low-income households, the impact is even worse as many have less discretionary income anyway and spend more of a percentage of their incomes on things like food, gas, rent—so when inflation hits these necessities, it makes the ability to absorb the punches even harder. Now it's not only a financial impact; it's a socioeconomic one which widens gaps even more.
The Broader Implications: What This Means for the Economy

But let's backtrack for a moment. Inflation has broader implications that are felt almost immediately through the economy and its relevant systems. For example, the Federal Reserve should be worried. The Fed's mandate is to ensure control of inflation, with their number one tool being interest rates. When inflation rises, raising interest rates can level inflation out, but it also decreases economic growth. If the Fed tries too hard to manipulate, we could fall into a recession in an attempt to stave off inflation.

As of today, the Fed is in a precarious position because inflation is greater than its goal of 2%. Yet inflation is not out of hand like it was in the 1970s with double-digit inflation percentages. The concern, however, is that inflation is trending upward—not downward—and with tariffs potentially being added to the cost, it makes sense for the Fed to keep interest rates higher for longer. Higher interest means higher APR on mortgages, credit cards, and loans—higher payments and compounded debt at the household level.

Yet there's a silver lining relative to wages. In the last twelve months, real average hourly earnings—wages adjusted for inflation—increased by 1.4%. This means that on average across broad strokes, wages are increasing in line with inflation—and slightly above. But this is an average; not all workers receive raises relative to their tenure. For example, low-wage workers may be frozen while high-wage earners might get more increases. Thus, it's the low-wage earners disproportionately suffering the consequences.
What's Next? The Future of Inflation

So what's next? It gets tricky. Many economists believe that inflation will remain high until at least 2027. Some inflationary forces—like tariffs that raise the prices of imported goods—will not go away so any predictions otherwise should be microscopically examined for plausibility. However, there's an upside to expected inflation with supply chain issues themselves hopefully leveling offmeaning what some consumers cannot get now (due to shortages/reductions) may mean that supply and demand decreases overall, helping inflation down the line. But ultimately, just like the trend of inflation spiking, it's safe to budget for inflation at least in the short term until more concrete developments take place. One thing that will ensure inflation is a development of national interest: tariffs. Trump's trade war mentality will surely create inflation. Whether it spikes or decreases is yet to be determined as pending revenue collections do not come until later in the year and whether businesses choose to pass on higher costs associated with tariffs to consumers is yet to be seen. Therefore, as someone reading this in 2025, if inflation is at 2.7% at the moment, it's safe to say come 2025 at years end, anything higher than 3.5% would not be shocking.

How Can You Protect Yourself?

The first thing you should do for inflation is adjust your mindset. Easy, no? Stress is daunting but you control budgeting your life and spending and potential income generation and increase projections so let's delve into how you can fight rising costs. First, re-evaluate your budget. Where can you save? Cut back? What entertainment expenses can you sacrifice? What overly expensive bills can you reduce? (After all, you don't need premium cable, nor do you need a $300 spa treatment every month). Second, acknowledge where you can generate revenue. Should you be asking for a raise at work? Have you stressed yourself enough the past year that you deserve one? Should you be seeking alternative work opportunities to increase cashflow? Sometimes an additional $100 or $200 per month will help ease the pain and costs of inflation.
Third, evaluate your liquid savings. If you have cash in a regular savings account earning almost nothing, you might be losing money to inflation. Look into high-yield savings accounts and investments that can provide a better return on your cash—there are options out there stressing 3-4% which are higher than inflation—but you need to tread carefully—any and all investments also hold risk, so do your homework.

Also evaluate your liabilities. If it's possible, get a fixed interest rate. The benefit of inflation here is that inflation will reduce the real value of your liabilities over time but it can also increase interest rates; it's a flip of a coin either way.

Conclusion

Inflation is an unwelcomed guest that arrives to your party and eats all your chips. It's annoying, it's lingering, and it has the potential to derail your intended life path. But the more you understand what inflation is, what causes it, and how it influences your day to day lifestyle of microeconomics, the more you can attempt to reduce its impact.

Inflation is currently at 2.7%, which although slightly above average, isn't a cause for concern—although something you should pay attention to. Tariffs might cause rising prices. Just be aware of your situation and be both proactive and reactive—you're not alone.

Everyone is feeling the crunch. But maybe we can help each other stay afloat during this economic downturn.

So when you go to the store and your favorite snack is a few dollars higher, remember—it's not you, it's inflation—and now you're empowered to combat it.

References

1. Bureau of Labor Statistics (BLS) - Consumer Price Index (CPI)
   • Title: "Consumer Price Index Summary - June 2025"
   • Date: July 10, 2025
   • Description: Official data on inflation rates, showing a 2.7% year-over-year increase in the CPI, with specific rises in housing, energy, and food prices.
   • Link: BLS CPI Summary
2. Federal Reserve - Monetary Policy Report
   • Title: "Monetary Policy Report - July 2025"
   • Date: July 15, 2025
   • Description: Details the Federal Reserve’s response to inflation, including interest rate policies and economic projections for 2025.
   • Link: Federal Reserve Monetary Policy Report
3. The Wall Street Journal - Inflation and Tariffs
   • Title: "Trump’s Tariffs Could Push Inflation to 3.5% by Year-End, Economists Warn"
   • Date: July 18, 2025
   • Description: Examines how recent tariffs on imported goods might drive inflation higher, with expert predictions for the U.S. economy.
   • Link: WSJ Article on Tariffs and Inflation
4. Economic Policy Institute (EPI) - Wage Growth Analysis
   • Title: "Real Wage Growth Outpaces Inflation for First Time in 2025"
   • Date: July 12, 2025
   • Description: Reports a 1.4% increase in real average hourly earnings over the past year, with insights into wage trends across income levels.
   • Link: EPI Wage Growth Report
5. National Association of Realtors (NAR) - Housing Market Trends
   • Title: "Housing Affordability Index - Q2 2025"
   • Date: July 5, 2025
   • Description: Highlights a 4% year-over-year rise in rent prices and its impact on housing affordability for low- and middle-income households.
   • Link: NAR Housing Affordability Index
6. Energy Information Administration (EIA) - Energy Price Outlook
   • Title: "Short-Term Energy Outlook - July 2025"
   • Date: July 8, 2025
   • Description: Provides data on a 0.9% increase in energy costs in June 2025, along with forecasts for future energy price trends.
   • Link: EIA Short-Term Energy Outlook
7. CNBC - Inflation and Consumer Impact
   • Title: "How Inflation Is Changing American Spending Habits"
   • Date: July 20, 2025
   • Description: Explores how rising prices are shifting consumer behavior, such as reduced discretionary spending and job-switching for higher wages.
   • Link: CNBC Article on Consumer Impact
8. Forbes - Financial Advice for Inflationary Times
   • Title: "5 Smart Money Moves to Combat Inflation"
   • Date: July 14, 2025
   • Description: Offers practical financial tips, such as budgeting strategies and investment options, to navigate inflationary pressures.
   • Link: Forbes Financial Advice