Americans of all income levels are feeling the pinch of inflation.
To some, that pinch represents a larger portion of their overall household spending.
Personal Capital data reveals that average monthly grocery spending across users of all net worths and salaries rose from $437 in January 2020 to $607 in January 2022. The leap represents a nearly 39% increase in grocery spending across the board.
And this isn’t for lack of eating out.
In addition, restaurant spending is up. January 2020 data shows a $610 average monthly spend at restaurants (including takeout) per Personal Capital user, compared to $660 in January 2022.
|Less than $1M net worth||$1-5M net worth||$5-30M net worth||Greater than $30M net worth|
|Jan 2020||Jan 2022||Jan 2020||Jan 2022||Jan 2020||Jan 2022||Jan 2020||Jan 2022|
|Total Spent on Food||$835.00||$1,039.00||$1,241.00||$1,459.00||$1,859.00||$2,247.00||$3,707.00||$4,721.00|
|Total Monthly Spend||$2,434.00||$2,996.00||$4,295.00||$4,901.00||$7,502.00||$8,571.00||$21,321.00||$27,726.00|
|Percent of Overall Budget Spent on Food||34.31%||34.68%||28.89%||29.77%||24.78%||26.22%||17.39%||17.03%|
Rising Costs of Staple Food Items
Rising food spending among Personal Capital users correlates to rising food prices on a national level. According to the Bureau of Labor Statistics (BLS), prices of common food staples have risen over the past two years.
Here’s a look at the average price per gallon of milk:
- $3.25 in January 2020
- $3.79 in January 2022
Source: Bureau of Labor Statistics
And bread prices:
- $1.35 in January 2020
- $1.56 in January 2022
Source: Bureau of Labor Statistics
Meanwhile, BLS reports these additional price increases for common household food products from Sept. 2020 to Sept. 2021:
- Cereals and bakery products: up 2.7%
- Fruits and vegetables: up 3%
- Nonalcoholic beverages: up 3.7%
How to ‘inflation-proof’ your household
Just as you consider how to adjust your portfolio to achieve your retirement goals, also keep in mind how much cash you keep in your portfolio. Personal Capital user data shows that most households with net worths between $1 million and $30 million keep under 20% of their overall portfolio in cash.
According to Michelle Brownstein, senior vice president of Personal Capital Private Client Group, this practice helps guard your money from rising prices by hopefully earning a return greater than inflation on whatever portion you don’t need in the immediate future.
“Cash relative to inflation is a guaranteed loss,” Brownstein says. “If I have cash, it’s the same dollar amount today as it was a year ago. And inflation is more than 7%.”
One exception is low inflationary environments, however: “In the last decade inflation has run close to 2%,” says Brownstein. When the economy is running at a 2% inflation rate, keeping cash in a high-yield savings account that earns 1% a year may be fine; you’re only losing 1% per year.
“But if you’re getting 1% on a savings account, and inflation 7%, you are losing 6% a year,” says Brownstein. “That is a big loss.”
Inflation is therefore one of the biggest risks to retirement spending, according to Brownstein. Retirement savers shouldn’t get too conservative too early on and aim to have a well-rounded strategy that includes small percentages of alternative investments as inflation hedges. That includes investments like gold, real estate, and commodities.
Want a better way to manage your investments? Millions of people use Personal Capital’s free and secure online financial tools to see all of their accounts in one place, analyze their investments, and plan for long-term goals, like buying a house or saving for retirement.
Author is not a client of Personal Capital Advisors Corporation and is compensated as a freelance writer.
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