Personal Finance & the Rising Cost of Living (2024)

FAQs

What is cost of living personal finance? ›

The cost of living is the amount of money needed to cover basic expenses such as housing, food, taxes, and healthcare in a certain place and time period. The cost of living is often used to compare how expensive it is to live in one city versus another. The cost of living is tied to wages.

This entails implementing policies that promote affordability in housing, healthcare, and education, while also finding ways to increase wages. By addressing the root causes of the rising cost of living, we can work towards a more equitable and financially secure future for everyone.

There's plenty to learn about personal financial topics, but breaking them down can help simplify things. To start expanding your financial literacy, consider these five areas: budgeting, building and improving credit, saving, borrowing and repaying debt, and investing.

Having a strong base in personal finance skills is the key to unlocking those greater attributes that money can provide. Understanding personal finance and how to leverage money, the banking system, loans, investments, and more means that money works for you, not the other way around.

California has one of the highest state tax rates in the country, and this is reflected in the prices of goods and services in Los Angeles. Additionally, the cost of living for employees in Los Angeles is higher than in many other cities due to the high cost of housing and transportation.

#1 Don't Spend More Than You Make

When your bank balance is looking healthy after payday, it's easy to overspend and not be as careful. However, there are several issues at play that result in people relying on borrowing money, racking up debt and living way beyond their means.

When the Going Gets Expensive. Most people feel the effects of cost-of-living increases in their daily lives. But rising prices hit the middle class hard, and the lower-paid harder. Higher food, gasoline, and utility costs mean less money for savings and less for discretionary spending.

The Economic Policy Institute and the Council for Community and Economic Research calculate cost of living indexes. The Social Security Administration issues an annual cost of living adjustment or COLA based on the inflation rate.

Supply chain bottlenecks and soaring demand for goods and services following the re-opening of the economy after the pandemic-related lockdowns sent prices for goods and services skyrocketing to four-decade highs last summer. But over the last few months, inflation has been decelerating.

Everyone has four basic components in their financial structure: assets, debts, income, and expenses. Measuring and comparing these can help you determine the state of your finances and your current net worth. You can think of them as the vital signs of your financial circ*mstances.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

According to Investopedia, “Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings and retirement planning.” Understanding these terms can help you better control your funds and prepare for future financial success.

Personal finance encompasses the whole universe of managing individual and family finances, taking responsibility for your current and future financial situation, and setting financial goals. It also includes handling individual financial tasks and saving for emergencies.

Financial literacy — which generally means understanding money topics ranging from income, budgeting, saving and investing, as well as how interest rates work and why credit scores matter — is lacking among many U.S. adults, studies show.

Living in a location with a high cost of living means your dollars may not go as far. You might live in Little Rock, Arkansas, and earn a salary of $60,000. If you move to Palo Alto, California, you'd need to earn over 80% more to maintain the same standard of living. That's almost twice the cost of living.

Basic living expenses, as the name implies, are ones necessary for daily living, with main categories including housing, food, clothing, transportation, healthcare, and relevant miscellaneous costs.

Explanation: An example of a living expense is an expenditure that is necessary for day-to-day life, such as housing, food, transportation, and utilities.

Cost of Living. The amount by which incomes must rise in order to maintain a constant standard of living. Consumer Price Index (CPI)