If it seems like you’re paying a little more at the grocery store this year, you’re not imagining it. In fact, prices are going up for everything from fresh produce to fish. And you can expect to pay more for other items as well. From groceries to healthcare and housing, these five common expenses could take a bigger bite out of your budget in 2016.
The Federal Reserve celebrated the end of 2015 by increasing the federal funds rate .25 basis points. What’s it to you? Well, that figure informs the interest rates charged by your bank and other lenders—and the Fed is likely to continue raising it over the next two years.
That means borrowing new money will be more expensive in 2016 and beyond, and current interest rates (and minimum payments) on your variable-rate credit cards, private student loans, adjustable-rate mortgages, and other types of personal credit, will increase, too.
Fortunately, the uptick is modest—so consider this extra motivation to work on paying down your debt before the next hike hits.
If you have private health insurance—such as a plan through your employer or purchased individually on an exchange—expect to shell out more for coverage this year. According to the PwC Research Institute, “medical cost trend,” or the number insurance companies use to calculate premiums, is projected to increase 6.5 percent.
“This isn’t as steep as the last couple of years, but it is still significantly more than the overall inflation, [which was .5% in 2015],” says Cecilia Beach Brown, Certified Financial Planner and owner of C. Beach Brown, a financial planning firm in Annapolis, Md.
It’s possible other plan benefits will change this year too, so take the time to read your policy and find out. Between 2006 and 2015, average deductibles—the amount you pay for care before insurance kicks in—tripled from $303 to $1,077.
It’s important to factor these increases into your budget, Brown says. Of course no one plans to get sick or undergo procedures, but that’s what having insurance is all about.
Renters may need to beef up their housing budgets in 2016, as demand continues to increase. “Millennials are coming of age, starting families and moving out of their parents’ homes,” Brown says. “As this happens, the largest generation since the Baby Boomers needs someplace to live.”
Indeed, Rent.com’s 2015 Rental Market Report shows that inventory is at a 20-year low, and almost 70 percent of property managers expect rates to rise an average of 8 percent.
Unfortunately, buyers won’t fare much better. “As the Fed raises rates, it’s likely that mortgage rates, even though they are not tied directly to the fed funds rate, will increase in 2016,” says Scott Cousino, Certified Financial Planner and president of Legacy Capital Planners in Grand Rapids, Mich. “[Plus], higher demand for housing will continue to drive up prices.”
Prices for new cars and trucks have been heating up over the past several years, and we’re expected to see record highs in 2016, according to a National Automobile Dealers Association economist. Thanks to lower fuel prices and pent-up demand, this time last year, people spent an average of $33,189 for a new ride.
The good news? New car prices should start declining in 2017, so if you’re in the market, it’s probably worth waiting another year—or considering a pre-owned model. Used-car values decreased 1.8 percent in December 2015, and are expected to keep dropping, according to CAP Blue Book.
Finally, get ready to feed your food budget another 2 or 3 percent this year. (If that sounds high, note that these numbers are on par with annual price hikes for the past two decades.) And buying groceries still beats going out, moneywise. The USDA’s Food Price Index forecasts that while prices for both groceries and restaurant bills will increase, it’ll still be slightly more expensive to go out than stay in.
Some of the most inflated grocery-store buys? Fresh fruits, vegetables and seafood could increase 3.5 percent, and poultry may bump up 3 percent, compared to last year’s modest 1.25 increase.
If you’re looking for a budget-friendly source of protein, focus on eggs: Though they increased about 17 percent in 2015, they’re not expected to rise more than 1 percent this year.
January 19, 2016