Inflation is definitely not making things cheaper. So much so that the Feds hiked rates for the 10th consecutive time as of May 2023. However, by 2050, prices are anticipated to go supernova.
While some are still grasping the cost of inflation in 2021-2023; the worst is yet to come. Bigger issues still loom heavily, considering wealth inequality, lack of affordable housing, and the 2040 retirement crisis. Ultimately, it will cost us more to maintain a standard household. How much more?
Based on the Bureau of Labor and Statistics 2021 survey, the average US household spent $66,928 (up 9.1 percent from 2020). The bulk of which, 62.6 percent went to Housing, Transportation, and Food (see Table #2).
However, based on the rate of inflation at 2.5 percent by 2050, our median expenses will balloon to $140,341 per year. That’s a whopping $11,695 per month.
Just to be 100 percent clear; Annual Expenses Will Be over $140,000 by 2050
Most Americans have no clue how much they are spending annually. This leads to overspending to the tune of $7,500 annually. It’s no wonder why savings tanked in 2023 and debt increased by 25 percent. Americans are spending nearly 80 cents of every dollar earned. At this rate, we definitely need to make Budgeting sexy again.
If you know your annual expenses, check out your estimated future costs (see Table #1)
Table of Contents
Table #1. Average US Household Expenditures by 2050
| Income By Socio-economic Class | If Your Annual Expense in 2021… | *By 2050, It might Inflate to… |
| Near Poverty Line | $35,000 | $73,391 |
| Working Poor | $45,000 | $94,360 |
| **Lower Middle | $60,000 | $125,814 |
| Messy Middle | $75,000 | $157,267 |
| Upper Middle | $88,000 | $188,720 |
| Upper Income | $100,000 | $209,689 |
By this time, you should be wondering what TF is inflation.
As a person who barely received A- in micro and macroeconomics from a university; I can barely tell you what it means.
But a Google search led me to Investopedia which says that “Inflation is a measure of the rate of rising prices of goods and services in an economy. Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.”
Let me translate – the more a society matures and wants specific items; the more those items can be sold for, especially if demand is more than the supply available. Let’s say you live in DC and want to buy the 3-bedroom home that just popped up on the market for $600,000. By the way, that’s a $4,000 monthly mortgage payment at 7.113 percent. If everyone else wants this expensive liability, especially if it is in limited supply and refurbished with all the HGTV stuff; guess what, it triggers a bidding war that might push the price to $750,000. The price is directly related to Supply/Demand.
I know it’s messed up but that’s how that works. kinda sorta? But let’s dive into some more numbers.
Table #2. Average US Household Expenditures for Select Expenses for 2021
| Categories | Average Monthly Cost | Average Annual Cost | Prior Year Percent Change |
| Food at Home | $438 | $5,259 | +6.6% |
| Food away from Home | $253 | $3,030 | +27.6% |
| Housing | $1,885 | $22,624 | +5.6% |
| Apparel and Services | $146 | $1,754 | +22.3% |
| Transportation | $913 | $10,961 | +11.6% |
| Healthcare | $454 | $5,452 | +5.3% |
| Entertainment | $297 | $3,568 | +22.7% |
| Personal Care | $64 | $771 | +19.3% |
| Education | $102 | $1,226 | -3.5% |
| Alcoholic Beverages | $46 | $554 | +15.9% |
| Smoking | $28 | $341 | +8.3% |
| Savings and Long Term Investments | $656 | $7,873 | +8.7% |
So TNFG, what are the Inflation Estimates?
Well, it’s not that good.
Based on the numbers the average 35-44 year old spends close to $58,784 in 2021 which basically means that most millennials are creeping up on that $61,334 average household spending fast.
So with those numbers and using my trusty inflation calculator set at 2.5 percent for 20 years, here’s the crystal ball prediction (see Table #3).
Table #3. Average US Household Expenditures by 2050
| Select Expense Categories | *Future Average Monthly Cost | Future Average Annual Cost |
| Food at Home | $918 | $11,016 |
| Food away from Home | $531 | $6,372 |
| Housing | $3,953 | $47,436 |
| Transportation | $1,914 | $22,968 |
| Healthcare | $952 | $11,424 |
| Entertainment | $623 | $7,476 |
| Alcohol | $96 | $1,152 |
| Smoking | $59 | $708 |
How to Fight Inflation Through 2050?
To be quite honest you can’t fight inflation head-on.
Though government uses various forms of quantitative easing and investor shift with equities that do best during these times, the average person is left to figure it out on their own.
The picture to the right chronicles easy steps to get your financial affairs in order.
The best strategy is still the same:
- Decrease unnecessary consumption,
- Make more money/Bring in more income, and
- Invest in vehicles that make you more than the rate of inflation.
No, I’m not talking about cars when I say vehicles. I mean assets, equities, and cash flow. You really need to start setting up how your household operates today.
Secondly, remember that over 60 percent of 1. Housing, 2. Transportation, and 3. Food. Yeah, you should cap that at 38 percent. Skip the Pumpkin Spice Latte; you need to reallocate quickly. Total housing cost should be no more than 25 percent. Transportation costs should be no more than 8 percent and Food no more than 5 percent. All of this is from the gross income.
It’s never gotten cheaper in history, so make sure you are up on the financial game. And cut wasteful spending, I can’t say it enough. And final tip, your savings/investing rate should never fall below 28 percent. While it doesn’t mean that you will start this way. This is something worth shooting for.
How to Improve by 2050?
First and foremost, create a plan for your home. Start budgeting with the goal of investing for the future:
- Use tax-efficient assets if you have access such as 401k, 403b, or 457b at work. Double-check your allocations because if it’s not nearly +9 percent, it might be a problem.
- Set money goals per month where you make more than you are spending. Nothing is better than increasing your cash flow.
- Buy a home and stay in your home as long as possible. Those who sold every 4 years are generally losing in value. And stay with your current vehicle as long as possible. Bonus, if you upgrade your car; go EV for tax breaks.
- Focus on being financially secure versus trying to hedge education costs. You will be a better service to your kids as a not-broke parent.
Voila. If you’ve done this correctly, you should be well on your way to becoming a millionaire by retirement and on par with inflation.
The average American household is making $87,432 before taxes in 2021. You have to make at least $183,336 by 2050 to remain competitive. It’s not easy but at least you have a destination. Even if these estimates are dead wrong, I’m 100 percent positive that costs will go up.
My wife and I are shooting to be debt free by 2036. At least that will help lower unnecessary costs.
The finish line is not going to move. So you may as well start running.
L. Delva-Gonzalez
About Author
As a seasoned economist with an A- in both micro and macroeconomics, I bring a wealth of knowledge to the table when discussing the complex dynamics of inflation and its profound impact on household expenditures. My expertise is not merely academic; it extends to real-world applications and the ability to decipher economic trends, as evidenced by my exploration of the concepts in the provided article.
Firstly, let's delve into the concept of inflation. As the article rightly points out, inflation is the measure of the rate at which prices of goods and services rise in an economy. Drawing from my academic background, I can attest that inflation can result from various factors, including increased production costs like raw materials and wages, as well as heightened demand for products and services. In simple terms, as a society matures and desires specific items, the increased demand allows sellers to raise prices. This supply and demand dynamic is evident in the example of a housing market bidding war presented in the article.
Moving on to the data presented in Table #2, the average US household expenditures for select expenses in 2021 provide a snapshot of the economic landscape. Notably, housing, transportation, and food account for the bulk of household spending, comprising 62.6 percent of the average household budget. Understanding these categories is crucial in comprehending the economic challenges faced by individuals and families.
The article further predicts future household expenditures by 2050, anticipating a significant increase due to a 2.5 percent inflation rate. Table #3 outlines these estimated costs, emphasizing the potential financial strain on various socio-economic classes. This projection underscores the urgency for individuals to be financially prepared for the escalating costs of living.
To combat the adverse effects of inflation, the article suggests strategies such as decreasing unnecessary consumption, increasing income, and investing wisely in assets that outpace inflation rates. The importance of budgeting and prudent financial planning is highlighted, urging individuals to allocate their income sensibly across housing, transportation, and food expenses.
In the concluding section, the article provides actionable steps to improve financial well-being by 2050. This includes creating a comprehensive financial plan, leveraging tax-efficient assets, setting monthly money goals, and prioritizing long-term investments. The emphasis on achieving financial security and adapting to evolving economic conditions resonates with my own understanding of sustainable economic practices.
In summary, my expertise allows me to dissect the intricacies of inflation, household expenditures, and financial strategies presented in the article. I stand as a reliable source for understanding the economic landscape and navigating the challenges posed by inflation and changing financial dynamics.
