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.

High housing costs can lead to eviction or foreclosure, which can force people to relocate far from their family or support network. This could make it difficult for people, especially seniors, to get rides to doctor appointments.

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.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

How to educate yourself financially? ›

The 10% rule is a savings tip that suggests you set aside 10% of your gross monthly income for retirement or emergencies. If you still need to start a savings account, this is a great way to build up your savings. You should create a monthly budget before starting your savings journey.

By practicing effective personal finance management, you can alleviate financial stress and anxiety. Knowing that you have a financial plan in place, an emergency fund for unexpected expenses, and a solid foundation for your future provides peace of mind and allows you to focus on other areas of your life.

Financial literacy in the US

The index explores eight functional areas across finance, such as earnings, savings, insuring and comprehending risk. Data from the 2024 index reveals how financial literacy in the US has hovered around 50% for eight consecutive years, with a 2% drop in the past two years.

U.S. adults have big gaps in their financial knowledge

For instance, adults correctly answered, on average, 50% of the 28 basic money questions in the 2022 TIAA Institute-GFLEC Personal Finance index, the sixth annual barometer of financial literacy.

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.

Cost of Living. the average cost of the basic goods and services needed to sustain a certain standard of living. Standard of Living. the level of wealth, comfort, material goods, and necessities available to a group of people. House Poor.

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.