6 Reasons You'll Spend More Money This Holiday Season (Even if You Aren’t Buying Gifts)
It’s a good idea to build a little extra room into your budget this winter, even if you aren’t planning on spending a lot on holiday gifts. Products and services across a wide range of categories have gotten significantly more expensive over the last year. That’s thanks to a supply chain crunch and inflation, which pushed prices 6.2% higher in October compared to a year earlier.
Plus, more Americans are comfortable with traveling, dining out and attending and hosting in-person gatherings again. That means they'll be spending a lot more on experiences and parties this winter.
One survey conducted by Goldman Sachs’ Marcus found that 34% of Americans plan to spend more on holiday gatherings this year than they did in 2020.
Here’s everything you need to know to avoid bill shock as the holiday season kicks into high gear.
Grocery prices are ticking up
Nearly half of adults surveyed by Morning Consult during the week of November 21 said they would be comfortable attending a party or social event, more than double the 20% of respondents who said the same at this time last year. And whether you’re hosting or bringing a dish, preparing for those holiday parties will be more expensive this season. Grocery prices have risen 5.4% over the last year, according to the Bureau of Labor Statistics, and meat prices have seen the biggest gains by far.
If you’re serving steaks, expect to pay nearly 25% more for them than you did last year. A pork chop will set you back 16% more than it used to. A side of bacon at a holiday breakfast will cost an extra 20%, and the eggs you serve it with will cost 11% more.
Restaurant prices are rising too
You’re not safe from higher costs if you eat out, either. Prices at full-service restaurants rose 5.9% on a yearly basis in October, according to data from the BLS. Prices at fast food restaurants rose 7.1% over the same period. Both spikes are the largest since the government began tracking data in these categories.
The uptick in prices comes as Americans are increasingly comfortable with eating outside the home again. During the week of November 21, 67% of adults surveyed by Morning Consult said they would feel comfortable going to a restaurant or cafe. That’s up from 36% of respondents who said the same during a comparable week in November 2020.
Gas prices are soaring
Fuel prices rose nearly 50% on a yearly basis in October – a huge spike compared to price changes in other areas of the economy. The average cost of gasoline is now $3.39 per gallon nationally, or $1.27 more than a year ago, according to AAA. In California, a gallon of gas costs nearly $5 a gallon, on average.
That means significantly more spending for Americans foregoing air travel in favor of road trips over the Christmas holiday. But it’s not all bad news: Last week, the Biden Administration announced a plan to release 50 million barrels of oil from the country’s strategic petroleum reserve to help bring prices down.
Rental cars are much more expensive
If you’re renting a car for your holiday travels, it’s not just gas that will put a dent in your wallet. It cost 39.1% more to rent a car or truck last month than it did in October of 2020, according to BLS data.
Here’s why: Pandemic-related factory shutdowns, a global shortage of semiconductor chips and shipping delays have contributed to a major shortage of new cars. Combine that with booming demand for cars as travelers avoided crowded airplanes and trains during the pandemic, and you have a recipe for sky-high prices.
It’s possible the supply-and-demand mismatch will even out in the months to come as auto suppliers adjust their operations to catch up, but it’s best to make reservations well in advance of your trip if you need to rent a car this winter.
Flight prices cost 55% more than last year
Thanks to vaccines and looser travel restrictions, major airlines are bracing for a huge surge in passengers, with an estimated 2 million people set to fly over the Christmas holiday. That’s double the number of people who traveled in 2020, according to Hopper, an app that tracks airline fares.
Carriers have raised their fares to keep up with the new demand, and rising jet fuel costs are likely to put even more upward pressure on prices. Domestic airfares for Christmas flights are averaging about $390, up 55% from $250 in 2020, according to Hopper. And consumers are already bracing themselves: A new report from MassMutual found that roughly a third of Americans expect to spend more this holiday season than they did in 2020 because of travel expenses.
Heating prices will spike this winter
Rising fuel prices also mean it will be more expensive to heat your home this winter. Household energy costs are up 12.7% on a yearly basis, according to the BLS. The U.S. Energy Information Administration is forecasting that natural gas heating bills this winter will be 30% higher than last year. Households that heat with propane can expect to pay 54% more, while households that use heating oil are looking at a 43% bump. Households that use electric heating are in the best shape – they’ll pay just 6% more.
What can you do beyond putting on an extra sweater around the house? There are lots of ways to lower your heating bill this winter, from programmable thermostats to adding more insulation to cleaning out filters in radiators and furnaces.
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