What Will The Cost Of Living Be In 2012?


As 2011 draws to a close, it is clear that the U.S. economy is at least beginning to stabilize. Unemployment reached its lowest level since February during the final quarter of 2011, while the average U.S. household has also enjoyed having additional disposable income since the close of 2010. With the Social Security Administration (SSA) also announcing a 3.6% cost of living increase for benefits recipients in 2012, you could be forgiven for thinking that the next 12 months will provide considerable economic respite for households across the land. (For related reading, see Increase Your Disposable Income.)

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Reasons for Caution
Despite the broadening beam of light at the end of the tunnel, the cost of living benefits increase is tempered by other government proposals for 2012. To begin with, the Medicare Part B premium is set to rise for the first time in three years, and there are fears that this may at least partially offset the increases in benefit. Not only this, but the maximum salary subject to social security tax is also set to rise from $106,800 to $110,100 in 2012, which will leave approximately 10 million U.S. citizens facing inflated tax liabilities.

Whether you work or are currently claiming social security benefits, it is becoming increasingly clear that 2012 may at best be a year of consolidation rather than considerable growth. This position is not helped by the financial crisis that is developing in Europe, which is providing a clear threat to the banking sector and economic growth as a whole. With this in mind, U.S. households need to remain prepared as they enter 2012, and take steps of their own to guard against a potential increase in the cost of living. (Read how to Maximize Your Social Security Benefits.)

Inflation and the Rising Cost of Food
With issues of tax and medical insurance placed to one side, there are other more fundamental concerns that influence the day-to-day cost of living. Inflation and the cost of food are two relevant examples, and both have soared throughout 2011 while the economy has stalled and unemployment has remained uncomfortably high. While the cost of both items are unlikely to remain as high throughout 2012, many U.S. consumers will still need to adjust their budgets to account for expenditures that is out of proportion from their incomings.

In terms of food, becoming a smart shopper applies both to the outlets that you frequent and the way in which you select and purchase goods. Many retail outlets and supermarkets now have an online store and delivery function, and this allows you to shop in a considered manner and without the lure of impulse buys and a handily placed electronics isle. It is also important to look beyond the basic retail price of food items, as this alone does not indicate whether it provides value for money. Break its cost down into the price per unit or individual measurement, so that you can make a considered purchasing decision on the deals that you find. (To learn more, read 22 Ways To Fight Rising Food Prices.)

Energy Costs
There is mixed news for motorists and homeowners when it comes to fuel and heating costs. The national average price of gasoline is expected to drop to $3.10 per gallon by January 2012, and this trend should continue throughout the remainder of the year. However, truck drivers and commercial diesel users can expect the price of fuel to remain high due to an increase in the exports of diesel. The cost of household heating oil is also set to rise significantly throughout the first quarter of 2012, with a harsh winter set to take its toll on consumers' wallets and force prices skyward.

As a motorist or homeowner, now is the time to prepare for these cost hikes and make the necessary adjustments. With diesel prices unlikely to fall significantly throughout 2012 and beyond, it may be worth considering either converting your vehicles engine to run on gas or investing in a more fuel efficient model to get you from point A to B. In terms of energy usage within the home, consider implementing LED lighting throughout your property as opposed to standard fluorescent fittings, and be sure to seek out and engage new energy providers once your current deal has expired. These steps will help to reduce your annual lighting and heating bills significantly, and offset any increase in base prices.

The Bottom Line
With all this information in mind, it should be clear that while the cost of living in the U.S. for 2012 may well fall from this year's highs, it will still remain out of proportion from the average household income. This means that families and consumers must tighten their belts and consolidate for the next 12 months, and offset their own cost of living increases by adopting sound financial practices. (For related reading, see Ways To Slash Your Home Energy Bill.)

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