gas prices

Apache is functioning normally

How much drivers pay at the gas pump — averaging $3.22 per gallon in September — depends largely on the price of oil and the cost of refining it. But federal, state and local taxes and fees can add significantly to the total.

On top of a federal tax of 18.4 cents per gallon, most states levy multiple taxes and fees on a gallon of gas. Those include some combination of excise taxes (imposed on goods, services and activities), sales taxes, environmental taxes and inspection fees.

Those costs add up to an average of 32.6 cents per gallon in state taxes, according to a NerdWallet analysis of U.S. Energy Information Administration data. Combined with the federal tax, that’s about 51 cents per gallon, on average, factored into the gas prices you see at your local station.

States with the highest gas tax

State tax rates vary widely. California’s rate (69.8 cents per gallon) and Illinois’s rate (67.1 cents) are highest, followed by Pennsylvania (58.7 cents). Alaska has, by far, the lowest state tax (9 cents per gallon), followed by Mississippi (18.4 cents) and Hawaii (18.5 cents).

2024 state gas tax hikes

In many cases, gas taxes are adjusted annually based on the consumer price index, a proxy for inflation calculated by the U.S. Bureau of Labor Statistics. That means taxes may rise (or fall) with the annual rate of inflation. Sometimes states also phase in new or higher fees by increasing them incrementally.

As for what happens with that tax revenue, states often use it to fund infrastructure improvements and environmental initiatives.

Oct. 1 gas tax hike

Washington D.C.’s motor fuel surcharge will tick up slightly from 11.4 cents per gallon to 11.8 cents per gallon on Oct. 1, according to the D.C. Office of Tax and Revenue. That fee is added to the district’s 23.5-cent sales tax on gasoline. Altogether, drivers pay 35.3 cents per gallon in state taxes when they fill up.

July 1 gas tax hikes

Gas taxes in seven states went up on July 1, generally by less than 2 cents.

Colorado’s road usage fee increased from 3 cents per gallon to 4 cents per gallon, according to the Colorado Department of Revenue. Additionally, an environmental fee increased from 0.6 cents per gallon to about 1.3 cents per gallon. Those fees are on top of a 22-cent gas tax. Altogether, the state tax on gas increased from about 26 cents per gallon to about 28 cents per gallon.

The Illinois gas tax increased from 45.4 cents per gallon to 47 cents per gallon, according to the Illinois Department of Revenue. All told, the state tax on gas increased from 66.5 cents per gallon to 67.1 cents per gallon in state taxes — the second highest in the country.

In Indiana, the gas tax increased from 34 cents to 35 cents per gallon, according to the Indiana Department of Revenue. In addition to the excise tax and a 1-cent oil inspection fee, the state charges a gasoline use tax. That tax rate is adjusted on a monthly basis. In July, the use tax rate is 20.1 cents per gallon. In all, Indiana drivers pay state taxes totaling 56.1 cents per gallon.

Missouri’s motor fuel tax rate increased from 24.5 cents per gallon to 27 cents per gallon, according to the Missouri Department of Revenue. Combined with two other fees levied on a gallon of gas, totaling about half a cent, the state taxes add up to 27.5 cents per gallon.

Nebraska’s fuel tax rate went up half a cent to 29.6 cents per gallon, according to the Nebraska Department of Revenue. Combined with an environmental fee, drivers in the state pay 30.5 cents per gallon in state taxes.

The Virginia motor fuels tax rate increased from 29.8 cents per gallon of gas to 30.8 cents per gallon, according to the Virginia Department of Motor Vehicles. The state’s motor vehicle fuels sales tax rate for gas increased from 8.7 cents per gallon to 9 cents. In all, motorists pay 40.4 cents per gallon in state taxes.

Source: nerdwallet.com

Apache is functioning normally

Georgia offers the best of both worlds—vibrant cities, charming small towns, and natural beauty from mountains to coastline, all without the hefty price tag found in some other states. While housing costs in Atlanta can be higher, especially if you’re renting an apartment downtown or looking to buy a home in Buckhead or other trendy neighborhoods, Georgia also has plenty of affordable areas. Cities like Augusta and Macon offer budget-friendly living while still providing access to culture, dining, and entertainment. If you’re considering a move to the South, here’s what you need to know about the cost of living in Georgia.

Housing costs: median home prices and average rent in Georgia

The cost of living in Georgia is appealing to many, particularly when it comes to housing. With the average rent in Georgia at $1,530, it’s a bit more affordable compared to the national average of $1,645. While rent in some areas may be higher, Georgia’s overall housing costs are lower than in many other states, offering potential savings for renters and homeowners alike. This affordability, paired with the variety of housing options across the state, makes moving to Georgia a popular choice for those looking to balance cost with quality of life.

GA housing costs: Average rents and median home sale prices

City in Georgia 1 Bed Avg. Rent 2 Bed Avg. Rent Median Home Sale Price
National Average $1,495 $1,725 $439,000
Alpharetta $1,966 $2,629 $745,000
Athens $1,485 $1,404 $330,000
Atlanta $1,830 $2,354 $394,000
Augusta $1,046 $1,177 $221,000
Brookhaven $1,865 $2,442 $688,000
Columbus $995 $1,195 $225,000
Decatur $1,563 $1,905 $445,000
Douglasville $1,492 $1,483 $336,000
Johns Creek $2,209 $2,624 $696,000
Macon $1,274 $1,348 $203,000
Marietta $1,395 $1,700 $435,000
Roswell $1,454 $1,683 $630,000
Savannah $1,650 $1,690 $325,000
Statesboro $880 $865 $263,000
Valdosta $1,000 $1,200 $225,000

Housing costs in popular Georgia cities 

Augusta

Known for its role as host of the prestigious Masters Tournament, Augusta combines Southern charm with affordability, making it a great option for those seeking a lower cost of living in Georgia. Average rent prices in Augusta are appealingly low, with one-bedroom apartments going for $1,046 and two-bedrooms at $1,177 – well below Georgia’s average rent of $1,530. And if you’re considering homeownership, the median price of homes for sale in Augusta is just $221,000.

Read more: Is Augusta, GA a Good Place to Live? | 7 Awesome Augusta, GA Suburbs

Atlanta

As Georgia’s bustling capital, Atlanta features average rents of $1,830 for a one-bedroom and $2,354 for a two-bedroom, significantly higher than the average rent in Georgia. Atlanta’s rich culture, robust job market, and renowned attractions—such as the World of Coca-Cola and the Georgia Aquarium—make it a magnet for those seeking a dynamic environment with ample opportunities and diverse neighborhoods. While the cost of living in Georgia’s largest city is on the higher end for the state, many find it’s worth the higher price tag.

Read more: 11 Affordable Atlanta Suburbs for Renters in 2024 | 9 Pros and Cons of Living in Atlanta

Discover popular Atlanta neighborhoods: Midtown Neighborhood Guide | Old Fourth Ward Neighborhood Guide | West End Neighborhood Guide

Brookhaven

Brookhaven is one of Georgia’s pricier areas, with average rents reaching $1,865 for a one-bedroom and $2,442 for a two-bedroom. The median home sale price of $688,000 in Brookhaven reflects its desirability, thanks in part to its lush parks and modern amenities. This upscale suburb offers a blend of tranquility and urban convenience, attracting those who appreciate its vibrant dining and shopping scene while being just a short drive from the heart of Atlanta.

Read more: What is Brookhaven, GA Known For?

Columbus 

In Columbus, average rents are incredibly reasonable, with a one-bedroom going for just $995 and a two-bedroom at $1,195. This affordability extends to homebuyers as well, with a median home sale price of $225,000. Known for its rich history and revitalized downtown area, Columbus offers a blend of cultural attractions and outdoor activities, including the scenic Chattahoochee Riverwalk. This charming city provides an excellent quality of life, making it an attractive option for those looking to enjoy a lower cost of living in Georgia without sacrificing access to entertainment and community amenities.

Macon

Macon is a gem for those seeking affordability, with average rents at $1,274 for a one-bedroom and $1,348 for a two-bedroom. The median home sale price of just $203,000 offers an inviting entry point for homebuyers. Known for its rich musical heritage and beautiful historic homes, Macon boasts a vibrant arts scene and a strong sense of community. This makes it an ideal place for those looking for a lower cost of living in Georgia while enjoying a laid-back lifestyle.

Savannah

In Savannah, where cobblestone streets meet coastal charm, average rents are $1,650 for a one-bedroom and $1,690 for a two-bedroom. Although this is slightly above the average rent in Georgia, it’s priced similarly to the national average rent of $1,645. Savannah’s unique blend of history and art, paired with its coastal beauty, makes it a coveted spot in Georgia—perfect for those who appreciate both culture and scenery.

Read more: Hidden Gems in Savannah, GA | 9 Popular Savannah, GA Neighborhoods

Georgia enjoys low utility costs across the state

When budgeting for the cost of living in Georgia, it’s important to factor in utility expenses. Compared to other areas of the U.S., Georgia residents pay less per month for basic utilities, such as electricity, heating, cooling, water, and garbage services. While costs can vary based on the season and location—cities like Atlanta may see higher rates due to increased demand or summer heat may lead to higher air conditioning bills—overall, Georgia’s utility prices tend to be on par with or slightly below the national average. This affordability adds to the state’s appeal, allowing residents to enjoy a comfortable lifestyle without overwhelming monthly expenses.

Monthly energy bills in Georgia compared to the national average

Data from Redfin’s Cost of Living Calculator, September 2024

Grocery costs in Georgia are slightly above the national average

Groceries in Georgia cost about 12% more than the national average. While Georgia has its share of affordable food options, particularly with its agricultural output, the costs can still add up, especially in urban areas like Atlanta where prices may reflect the higher demand and cost of living. In smaller towns, the prices for groceries are often a little lower, making it easier to fill your cart without breaking the bank.

For example, groceries in Macon cost about 3% less than the national average. The average cost of one loaf of bread here is $3.70, compared to the national average cost of $3.97. Meanwhile the cost of groceries in Savannah is 2% more expensive than the national average – so that same loaf of bread will cost you $4.20 in this area of Georgia.

Georgia transportation costs fall just under the national average

Transportation costs in Georgia can significantly affect your budget depending on where you live. Gas prices in the state are often close to or just below the national average, currently around $3.00 per gallon. Commuters in cities like Atlanta, where traffic is heavier and drive times longer, might spend more on gas and car maintenance compared to those in smaller towns like Valdosta or Macon. Car insurance rates also tend to vary across the state, with Atlanta residents likely paying higher premiums due to increased traffic and accident risk. In more rural areas, you’ll find both gas and insurance to be more affordable. Public transportation is primarily limited to larger cities like Atlanta, where options like MARTA can help offset transportation costs.

Taxes in Georgia are more reasonable than most coastal states

Georgia’s relatively low tax rates play a significant role in maintaining an affordable cost of living in the state. The statewide sales tax in Georgia is set at 4%, but some localities add a small local tax that can bring the total combined tax to around 6-8%. On average, the statewide sales tax typically falls between 5%-7%, and 

Let’s take a look at the total combined sales tax in a few popular Georgia cities, from highest to lowest:

Georgia City Combined Sales Tax
Atlanta 8.9%
Augusta 8.0%
Athens 8.0%
Columbus 8.0%
Valdosta 8.0%
Statesboro 7.0%
Savannah 7.0%
Macon 7.0%
Douglasville 7.0%
Marietta 6.0%

Georgia’s income tax is progressive, with rates ranging from 1% to 5.75% based on income levels, providing a structure that can benefit lower- to middle-income earners. These tax policies help keep the overall cost of living in Georgia below the national average, making it easier for residents to manage their daily expenses. In comparison to states with higher taxes, Georgia offers a more budget-friendly environment, allowing for greater financial flexibility.

Healthcare costs in Georgia vary across the state

Georgia may have reasonable housing and utility costs, but the cost of healthcare tends to be on the higher end here. Of course, the overall costs depend on a number of factors and are different for each individual. Factors like insurance premiums, prescription prices, and out-of-pocket expenses can add up, especially for those with specific medical needs. While Medicaid is available for low-income residents, many still face rising costs for medical services. Depending on where you live in Georgia, your insurance coverage, and your medical needs, you may be spending more than the national average on healthcare.

Healthcare costs in Georgia compared to the national average

Dentist Visit Doctor Visit Optometrist Visit Comparison to National Avg.
National Average $115.50 $140.46 $128.65
Augusta $82.88 $92.49 $156.01 -20% less
Athens $123.20 $125.69 $89.40 -2% less
Atlanta $141.15 $129.99 $126.92 +7% more
Columbus $186.20 $179.78 $78.48 +28% more
Douglasville $116 $108.42 $88.66 -10% less
Macon $116.87 $131.32 $113.56 -8% less
Marietta $123.12 $111.52 $97.82 -8% less
Savannah $148.53 $138.87 $92.71 +10% more
Statesboro $159.46 $195.52 $138.39 +27% more
Valdosta $115.59 $118.04 $113.66 -3% less
Data from Redfin’s Cost of Living Calculator, September 2024

How much do I need to earn to live in Georgia?

To live comfortably in Georgia, it’s important to consider how much of your income goes toward housing. A common guideline is to spend no more than 30% of your gross monthly income on rent, leaving room for other expenses. With the average rent in Georgia at $1,530, you would need to earn about $5,100 per month or roughly $61,200 annually to stay within this budget.

However, your specific income requirements can shift based on location. Renting in bustling cities like Atlanta or Columbus will generally demand a higher income, while more affordable areas like Augusta or Savannah may allow you to live comfortably with a bit less. Factoring in housing costs across different regions helps ensure your overall cost of living in Georgia stays balanced and within budget. It can be helpful to use a tool like our rent calculator, which can help you determine the ideal rent based on your income and financial goals.

Methodology

Average 1-bedroom and 2-bedroom rent sourced from Rent. Median home sale price, state average monthly rent, national rent prices, and cost of living data sourced from Redfin.

Source: rent.com

Apache is functioning normally

Rising costs tighten margins for business owners. And to make up for that increased pressure, businesses usually have to raise prices — which, when it’s done month after month, can start to wear on customers.

Customers are facing “price increase fatigue,” says Kirk Jackisch, president of consulting firm Iris Pricing Solutions. “They’re done. They can’t take it anymore — just across-the-board price increases. So you have to look at more surgical solutions.”

Targeting price increases carefully and communicating them clearly can help ease the pain customers feel, Jackisch says. Here’s how you can go about it — and what you need to avoid as legislators across the U.S. focus on fees and surcharges.

Balance price increases with new deals

Matthew Heaggans is co-owner of Preston’s: A Burger Joint, a restaurant in Columbus, Ohio. When sambal, an ingredient they used in a signature sauce, more than doubled in price, Preston’s began buying chili peppers to make their own — but then those tripled in price, too.

In light of such rising costs, Heaggans says Preston’s raised prices by about 7% on average. But that doesn’t mean they’ve raised every price by 7%.

For example, while a burger might be more expensive than it used to be, sides are now cheaper when you buy them as part of a combo.

“People are driven very significantly in our market by price,” Heaggans says, so it’s essential that Preston’s keeps prices competitive.

If you’re concerned about the long-term impact of price increases, you can opt to adjust them temporarily to account for cost shocks. For example, as egg prices spiked in 2023, some restaurants temporarily increased the prices of dishes containing eggs. Shipping companies have long adjusted their fuel surcharges as gas prices rise and fall.

Fortunately, for all of the “agonizing” he put into price changes, Heaggans says customers didn’t mind.

“My constant plea to consumers is that if you really, really like a thing, you should support it or it’s going to go away,” Heaggans says.

Don’t inflate your fees to avoid raising sticker prices

Customers often feel duped by last-minute or opaque fees — and regulators are taking aim at them, too.

At the federal level, the Biden administration has announced plans to crack down on junk fees on everything from event ticketing to college textbooks. And as of July 1, California has banned “drip pricing,” or advertising a price that doesn’t include mandatory additional fees and surcharges.

California’s law is designed to target last-minute, high-cost service fees on products and services like concert tickets and hotel rooms, says David W. Wright, an attorney at Pillsbury Winthrop Shaw Pittman LLP in Los Angeles.

The law is “not necessarily preventing businesses from trying to recoup those costs, but instead trying to make it so that businesses disclose those costs up front so consumers know what they’re getting themselves into,” Wright says.

Under California’s rule, handling fees have to be listed as part of the advertised price. “Reasonable” shipping fees and taxes, however, do not.

“The safest way to protect yourself is to include all prices” within the sticker price, Wright says.

Other states limit pricing practices in additional ways. For instance, some companies pass credit card charges onto customers to offset their payment processing costs. But several states restrict the practice. For example, New York requires you to include these fees in the posted price but allows you to charge a lower price for customers paying cash. And Colorado caps credit card surcharges at 2%.

Offer customers fee-free alternatives when possible

Jackisch also recommends increasing prices in ways that focus on the customers who cost the most to serve — like those that request rush jobs or ask for last-minute changes.

For example, if your company typically delivers orders in four weeks and a customer requests a two-week turnaround, you might apply a rush charge. After all, your business will have to absorb the costs of disrupting your normal operations to meet that customer’s needs.

Most customers see fees tacked onto their bills as “punitive,” Jackisch says. The key is to make sure there’s a way to avoid those fees and explain what it is.

The fee-free alternative in this case? For the customer to wait the typical four weeks.

Salespeople should be able to explain that when it comes to customer requests, “we’re happy to do it. But just recognize that there’s a cost to us, and we’re passing some of that along to you,” Jackisch says. “That communicates the value and the fairness of the fee.”

Source: nerdwallet.com

Apache is functioning normally

Enjoy complimentary access to top ideas and insights — selected by our editors.

In recent years, the U.S. has hit record inflation rates due to factors as wide ranging as labor shortages and the war in Ukraine, but the degree to which prices have risen vary across the country.

WalletHub recently determined how inflation is impacting different communities in the U.S. by comparing 23 major MSAs (Metropolitan Statistical Areas) across two key metrics related to the Consumer Price Index, using the factors to determine a total score out of 100 for each metro area.

“Rising housing and natural gas prices accounted for 70% of the 3.4% increase in the latest monthly CPI report,” David Skidmore, professor of political science at Drake University, said in a WalletHub release. “Older homeowners who have mortgages locked in at low fixed rates are staying put, with the result that fewer homes are available for younger homebuyers to enter the market. This, along with sluggish new home construction, has pushed up home prices. Rents have risen to match.”

Read more: Inflation, housing costs spook consumers 

The metro area on this list with the biggest inflation problem is Detroit-Warren-Dearborn, Michigan, which has the highest CPI change over two months. Other top metro areas include Dallas-Fort Worth-Arlington, Texas, and Urban Honolulu, Hawaii. Honolulu has the highest CPI change over the year. 

Read more about the cities with the biggest inflation problems.

Source: nationalmortgagenews.com

Apache is functioning normally

When you ask people how they’re doing, you often get a knee-jerk “fine” or “good” without much introspection. But lately, when you ask people about the economy, they have clear feelings.

Over the past several years, the economy has been remarkable, in a literal sense; there has been a lot to talk about. Inflation rose to levels we hadn’t seen in about 40 years, and home prices climbed roughly 50%. The Federal Reserve stepped in to fight inflation. Interest rates reached territory they hadn’t touched in 20 years or more, but they did so without triggering a recession. Economic growth has remained high and the labor market strong. All of these factors have resulted in a cacophony of narratives about the economy, which is very likely playing a role in people’s perceptions.

A new survey from NerdWallet, conducted online by The Harris Poll among more than 2,000 U.S. adults, reveals a disconnect that illustrates these perceptions well. When asked how they feel about a variety of economic and financial topics now compared with 12 months ago, Americans were nearly twice as likely to feel worse than better about the state of the U.S. economy in general. Yet they were slightly more likely to feel better than worse about the state of their own personal finances.

Over the past 12 months, the survey period we asked about, the economy has actually remained strong, and the post-pandemic recovery has carried on better than expected. Consumers continue spending, which is typically taken as a sign of confidence. It may be tempting to disregard negative sentiment if we can’t confirm it’s rooted in current economic reality. But that sentiment may provide clues to yet-unseen problems and potentially drive behavior changes that could have significant economic impact.

Half of Americans are feeling worse about the economy

People’s perceptions are colored by their background, personality traits and exposure to information, among many other things. And these perceptions don’t always reflect demonstrable reality, particularly when you ask about how people feel. Asking about perceptions and focusing on an emotional component can give people explicit permission to detach their experience from what the actual evidence might show. And often, it’s likely our feelings that govern our behaviors, whether we’re talking about managing relationships or spending money.

About half (49%) of Americans say they feel worse about the state of the U.S. economy in general now compared to 12 months ago, according to the NerdWallet survey conducted in April. Just 26% feel better. Among the questions asked, this one garnered the strongest opinions — it had the lowest rate of people who neither felt better nor worse.

Twelve months before this survey, the economic indicators most people would encounter in daily living were pretty close to where they are now. Unemployment was a low 3.4%; now, it’s still low by historical standards, at 3.9%. Gas prices were relatively the same: $3.71 per gallon on average then and $3.73 now. One major improvement over that one-year period can be found in price growth, however. Inflation in April 2023 was near 5%. Now, it’s closer to 3.5%. In fact, wages are now growing faster than prices.

When asked to look more locally — how they feel about the state of their personal finances now versus 12 months ago — one-third (33%) of Americans feel better and 29% feel worse. Parents of minor children are more likely (39%) than non-parents (31%) to feel better.

What’s driving the disconnect?

The disconnect between how people feel about the economy at large and how they feel about their household finances seems counterintuitive. By most official measures, the economy is strong. If feelings or perspectives run contrary to that, one source of the negative sentiment could be personal experience. In other words, if I feel bad about the economy when the economy is doing well, maybe it’s because my personal financial situation is not so great. But a modest segment of Americans hold these two seemingly disparate feelings simultaneously: 18% of those who feel worse about the economy now than they did 12 months ago say they feel better about their personal finances over the same period.

There are many other possible explanations for the perception of a worsening economy, including:

1. We could be measuring the economy wrong (maybe it’s not doing as well as we think). The COVID-19 pandemic didn’t just shake the economy, it shook economic data too. This explanation might not be the most likely, however, as the people responsible for economic data are experts in their field. If someone’s going to get it right, it’s likely them. Data collection, benchmarking and seasonal adjustments have all been impacted and continue to be accounted for.

2. Exposure to negative stories in the news or social media could be coloring people’s outlook on the economy’s health. The last high inflation period was a relative lifetime ago, in the 1980s. Then, our primary sources of economic information came at regularly scheduled and limited intervals: in the morning newspaper or in front of the evening newscast, for example. Now, economic data is everywhere you look, translated by both experts and social media influencers alike. This consistent attention to the economy’s measurements could be having an outsized impact on our perception of its well-being.

3. The housing market could be playing an outsized role in overall economic perspectives. If there’s one section of the economy that is undoubtedly difficult, it’s the housing market. Under current conditions — high home prices, a paltry number of homes available for sale and high borrowing costs — even if someone has taken steps to position themselves to buy, they’ll be met with difficulties. Healthy household finances can only get you so far if you’re trying to buy a home in this unfriendly market, and confronting these roadblocks on the path to a long-term financial goal can be very discouraging.

4. We’re aware that even though we might be doing better personally, others aren’t so fortunate. Aggregate measures of the economy conceal a lot of nuance. Unemployment is low on a national scale, but people are still unemployed. Wage growth is outpacing inflation, but not everyone is receiving raises. Even if you personally aren’t experiencing any downside to this economy, knowing that others are may color your views. This isn’t necessarily a bad thing — empathy across the economy can drive meaningful community involvement and policies that improve the well-being of others.

What we shouldn’t do is assume that people just don’t understand the economy and write off the disconnect as immaterial. At some point, how we feel about the economy can impact how we act. It can affect decisions such as whether now’s a good time to buy a new car, invest in the stock market or start a new business. For business owners, it can impact hiring and investment decisions. And all of these spending and saving decisions can ultimately impact the health of the economy, feeding into official data. Consumer expenditures account for about two-thirds of total GDP, for example. So how we feel about things, no matter the driving force, can impact economic reality. And that makes this sentiment worth listening to.

Source: nerdwallet.com

Apache is functioning normally

(Getty Images)

The Bank of England has kept interest rates at a 16-year high for at least another month, as governor Andrew Bailey said Threadneedle Street would not bow to political pressure to cut rates.

The BoE’s Monetary Policy Committee (MPC), announced its latest decision at midday on Thursday, opting to keep the current rate of 5.25 per cent – set last August – in a blow to those hoping for the first reduction since 2020.

High interest rates have saddled homeowners with soaring mortgage repayment costs, and are used as a tool to help bring down inflation.

While the rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, experts had suggested that two key economic indicators – pay growth and services sector inflation – have remained more stubborn.

ADVERTISEMENT

In positive news, the Bank improved its forecasts on Thursday to predict that CPI inflation would fall to 2.25 per cent next year and to 1.5 per cent in 2026, and said it expected the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.

Key Points

  • Breaking: Bank of England holds interest rates at 5.25%

  • Governor Andrew Bailey says Bank will not bow to political pressure

  • Inflation will fall to 1.5 per cent within two years, Bank forecasts

  • Pay growth and services sector inflation remain stubborn

  • Voices: Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak

16:02 , Andy Gregory

We’re pausing updates on the liveblog for this evening, thanks for following here.

You can read our latest reporting on the Bank of England’s announcement by clicking here, or else keep scrolling to catch up on the day’s events as we reported them.

Chancellor praises ‘finely balanced’ interest rates decision

15:20 , Andy Gregory

Chancellor Jeremy Hunt said the Bank of England’s decision on rates was “finely balanced”.

Asked if he had been hoping rates would be cut ahead of the general election, Mr Hunt said: “I welcome the fact the Bank of England’s obviously thought about this very hard, they take this decision independently.

“And I would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage.

“What we want is sustainably low interest rates, and I think what’s encouraging is that the Bank of England governor, for the first time, has expressed real optimism that we’re on that path.”

Jeremy Hunt ((Kirsty Wigglesworth/PA))

Bank of England will not wait for US Federal Reserve to cut rates, says Bailey

14:59 , Andy Gregory

The Bank of England will not wait for the US Federal Reserve to move on interest rates before it decides to cut rates in the UK.

Andrew Bailey, governor of the Bank of England, said: “There is no law that the Fed has to go first. Moreover, we have a remit and a target that is related to domestic inflation in the UK.”

He added that the Bank will always “take the rest of the world into consideration”, but only in regard to how it affects domestic inflation.

“But there’s no law which says we can only move after the Fed moves. That is not something that ever gets discussed in the MPC.”

Bank of England ‘getting very close’ to first rate cut since 2020, says economist

14:41 , Andy Gregory

James Smith, ING developed markets economist, said: “The Bank of England is getting very close to its first rate cut. That much is clear from the latest policy statement which, while keeping rates on hold at 5.25%, has a distinctly more optimistic flair.

“It echoes recent comments from governor Andrew Bailey, who has been hammering home the message that the UK’s inflation outlook is quite different to the US.

“We’re still leaning slightly more towards an August start date for rate cuts, though it’s a close call. What isn’t in doubt is that the Bank is comfortable with moving ahead of the US Federal Reserve.”

Bank of England will not bow to political pressure to cut rates, says Bailey

14:22 , Andy Gregory

The Bank of England will not bow to increased pressure from politicians to cut interest rates, its governor has said.

Andrew Bailey said: “We are an independent central bank. We have a very clear remit. It’s our duty to exercise our duty at all times. When we are sitting in a room as the Monetary Policy Committee, we never discuss politics … It isn’t a consideration in that respect.”

It comes amid a period of heightened pressure from some MPs on the Bank to move faster on rate cuts in the run-up to a general election later this year.

When pressed on whether an upcoming election could influence how the Bank makes its decisions on rates, Mr Bailey added: “We will take the decisions at each meeting which are consistent with our remit. That’s our job and we will do our job.”

Inflation to fall before rising slightly before end of year, says Bank

14:04 , Andy Gregory

The Bank of England has predicted that lower oil and gas prices mean that inflation is likely to drop to around 2 per cent in the coming months before rising slightly before the end of the year.

Inflation could fall noticeably below target without rate cuts, says Bailey

13:52 , Andy Gregory

Here are more comments from Bank of England governor Andrew Bailey.

He told reporter: “It’s likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates.

“This will be consistent with ensuring that inflation does not fall noticeably below target at the end point of the forecast.”

Pound falls against the dollar

13:35 , Andy Gregory

The pound fell against the US dollar and euro after the Bank of England signalled growing support for an interest rate cut among policymakers.

Sterling fell 0.3 per cent to $1.246 and was 0.2 per cent lower at €1.161.

Financial markets more pessimistic than Bank of England, Bailey indicates

13:17 , Andy Gregory

Andrew Bailey has indicated that the financial markets are more pessimistic about the path for lowering interest rates than the Bank of England.

“With the progress we’ve made, to make sure inflation stays around the target, it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets,” he said.

The Bank governor said the committee has “no preconceptions” about how far and how fast it can lower interest rates, and it make a judgment based on the economic data it sees before each meeting.

(EPA)

Visualised: How have interest rates changed over time?

12:58 , Andy Gregory

The below graph shows how interest rates have changed over the past decade:

(Bank of England)

Bank has not ruled out cutting rates next month, says governor

12:49 , Andy Gregory

The Bank of England has not ruled out cutting rates at its next Monetary Policy Committee decision.

Andrew Bailey, governor of the Bank, said that upcoming economic data would be key to helping the MPC decide whether to cut rates on 20 June.

He said: “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgement afresh.

“But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.”

Full report: Bank of England holds base rate for ninth consecutive month

12:20 , Andy Gregory

The Bank of England has kept interest rates on hold at 5.25 per cent for the ninth month in a row.

My colleague Jane Dalton has more in this report:

Bank of England holds interest rates at 5.25% despite hopes of cut

Inflation will fall to 1.5 per cent within two years, Bank of England forecasts

12:14 , Andy Gregory

The Bank of England has projected that inflation will fall more than previously thought over the coming years – dropping below its 2 per cent target to 1.5 per cent in 2026.

Headline CPI inflation is expected to fall below the Bank’s 2 per cent target between April and June, but rise again to 2.6 per cent in the second half of this year as the impact of recent drops in energy prices fades.

In the longer term, the Bank dropped its projections for CPI inflation to 2.25 per cent for 2025 and 1.5 per cent in 2026, down 0.25 and 0.5 percentage points respectively on the Bank’s February estimates.

The projection came in the Bank’s May Monetary Policy Committee (MPC) report, which signalled optimism from recent falls in retail inflation. The report said persistently high interest rates had helped push headline inflation down.

Bailey signals optimism that Bank could soon cut rates

12:10 , Andy Gregory

Governor Andrew Bailey has signalled optimism that the Bank of England could soon cut rates.

The Bank’s Monetary Policy Committee voted by a majority of seven to two to keep rates unchanged – with members Dave Ramsden and Swati Dhingra voting to cut rates by 0.25 percentage points.

Mr Bailey said: “We’ve had encouraging news on inflation and we think it will fall close to our 2 per cent target in the next couple of months.

“We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”

The MPC indicated it is still looking for more progress on factors including services inflation and wage growth, which have remained persistently high at about 6 per cent, before cutting rates.

Andrew Bailey, governor of the Bank of England, said there had been encouraging news on inflation (Justin Tallis/PA)

Bank of England expects economy to grow by 0.5% this year

12:08 , Andy Gregory

The Bank of England said it expects the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.

Breaking: Bank of England holds rates at 5.25 per cent

12:01 , Andy Gregory

The Bank of England has opted to keep interest rates at a 16-year high of 5.25 per cent – confounding hopes of the first base rate cut since 2020.

We’ll bring you more updates here as we get them.

BoE chief unlikely to give clear signal on when interest rate cut could come, economist predicts

11:08 , Andy Gregory

Bank of England chief Andrew Bailey is unlikely to give a clear signal on exactly when the bank’s first interest rate cut since 2020 might come – but focus will be on what guidance he does give and if more than one member of the Bank’s Monetary Policy Committee votes for a cut this time around, according to Pimco economist Peder Beck-Friis.

“We know from history that policy meetings may create some volatility,” Mr Beck-Friis said.

“What is also interesting is that we have come from a few years where monetary policy has been very correlated globally … but as the pandemic shocks fade I think it is natural that we see some divergence,” he added – pointing to how Sweden and Switzerland had already cut rates while the US may need to wait longer.

Pound falls against US dollar

09:23 , Andy Gregory

The pound edged lower against the US dollar this morning ahead of the Bank of England’s policy meeting, with the central bank expected to hold rates steady but flag when it intends to lower the cost of borrowing.

According to LSEG data, money markets are pricing in an almost 95 per cent chance that the Bank will hold its benchmark interest rate at 5.25 per cent – the highest since 2008. But investors will be watching for signs of when the first interest rate cut in four years will come as inflation falls.

Markets now see a 56 per cent chance of such move in June – when the European Central Bank has already signalled it will reduce borrowing costs, and a greater chance of 72 per cent of a BoE rate cut in August.

London stocks waver ahead of Bank of England announcement

08:40 , Andy Gregory

London stocks wavered this morning as investors turned cautious ahead of the Bank of England’s interest rate decision – while energy shares gave a boost to the benchmark index.

As of 7:17am, the blue-chip FTSE 100 edged up 0.1 per cent at 8,357.85, hovering below its record high of 8,365.28 points. The mid-cap FTSE 250 edged lower by 0.1 per cent.

The pound slipped against the US dollar and the UK’s benchmark 10-year gilt yield was at 4.155 per cent ahead of the decision.

Investors avoided big bets ahead of Threadneedle Street’s interest rate decision due at 11am, where the central bank is widely expected to keep borrowing costs steady.

Bank of England to shed more light on its predictions for the economy today

06:00 , Maryam Zakir-Hussain

The Bank of England will shed more light on its predictions for the economy and the path of interest rates when it publishes the latest Monetary Policy Report alongside the rates decision today.

Meanwhile, the central bank in the US, the Federal Reserve, said on Wednesday it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.

It means rates could stay higher for longer until there is firmer evidence of price rises easing, its chairman Jerome Powell suggested.

04:00 , Maryam Zakir-Hussain

Andrew Goodwin, chief UK economist for Oxford Economics, said: “The data published in mid-April for services inflation and private sector regular pay growth has likely extinguished any remaining hopes of a move in May.

“Though both measures have continued to fall, progress has been slightly slower than the MPC anticipated, and they are currently running marginally higher than the forecasts published in February’s Monetary Policy Report.”

He said it is likely to be a “close call” on whether the MPC decides to cut rates in June or August.

02:00 , Maryam Zakir-Hussain

Higher interest rates are used as a tool to control inflation, which has fallen sharply in recent months.

The latest official figures showed that Consumer Prices Index (CPI) inflation slowed to 3.2% in March, as it edges closer to the Bank’s 2% target.

But economists think the Bank’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.

Mapped: Which areas worst hit by mortgage rate hikes as homeowners ‘forced to move’

Thursday 9 May 2024 00:00 , Maryam Zakir-Hussain

Homeowners coming off fixed rate mortgages faced huge rises in their monthly payments, latest figures have revealed, with the costs severely biting into household disposable income.

With the Bank of England base rate rising to 5.25 per cent in the summer of last year, families faced soaring mortagage rates with the average two-year fixed rate reaching 6.9 per cent.

The new rates meant many homeowners, especially those with large mortgages still to pay, faced challenging increases in monthly payments.

Mapped: Areas worst hit by mortgage rate hikes as homeowners ‘forced to move’

Bank of England not yet ready to cut UK interest rates, experts say

Wednesday 8 May 2024 21:57 , Maryam Zakir-Hussain

UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.

The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.

However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.

Bank of England not yet ready to cut UK interest rates, experts say

Wednesday 8 May 2024 19:18 , Maryam Zakir-Hussain

Philip Shaw, chief economist at Investec, said: “This broad direction illustrates that collectively the committee is moving gradually towards a rate cut.

“It seems unlikely though to be ready to bite the bullet just yet and the Bank rate looks set to remain on hold at 5.25% for the sixth consecutive meeting.”

He added that it is possible that a second member of the MPC will switch to the “easing camp” and vote for a cut on Thursday.

‘Too early’ for economists to cut rates, economists predict

Wednesday 8 May 2024 17:30 , Maryam Zakir-Hussain

Economists think the Bank of England’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It is almost certainly too early for the Bank of England to pull the trigger on a rate cut right now, especially against the backdrop of a more hawkish US central bank.”

The US Federal Reserve said last week it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.

It means rates could stay higher for longer until there is firmer evidence of price rises easing, the Fed’s chairman Jerome Powell suggested.

Mr Khalaf said the Bank is also likely to be influenced by the European Central Bank, which is widely expected to cut rates in early June.

“The other important factor is more inflation readings for April and May, where CPI could get very close to, or possibly even hit, the Bank’s 2% target,” he added.

“The closer the inflation dial gets to 2%, the greater the pressure on the Bank of England to take its foot off the brake and cut rates.

“Markets currently think it’s a coin toss whether we get a UK rate cut in June, but this rises to a three in four chance priced in by August.”

The housing market has turned – so what does that mean for buyers and sellers waiting to make a move?

Wednesday 8 May 2024 16:29 , Maryam Zakir-Hussain

House prices are down and mortgage costs are up, writes James Moore. So how long will buyers and sellers need to wait before the market shows signs of life?

Britain’s housing market has turned hostile again, at least for sellers. The latest Nationwide index showed a surprise 0.4 per cent fall in April, the second month-on-month decline in a row.

A rival index produced by Halifax recorded a 1 per cent month-on-month fall in March, with the next update due next week. These indices can be volatile, but another fall would now be the betting favourite.

Read more here:

House prices are falling – but what does it mean for the future market?

Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak

Wednesday 8 May 2024 15:47 , Maryam Zakir-Hussain

Thanks to the Liz Truss mini-Budget disaster, the Conservatives can no longer claim to be the party of economic competence, writes Andrew Grice. But an election campaign based on the economy is still their best hope of avoiding annihilation:

Improving the economy will not save Rishi Sunak

Pay growth and services sector inflation remain stubborn

Wednesday 8 May 2024 15:45 , Maryam Zakir-Hussain

Interest rates are used as a tool to help bring down UK inflation, which has fallen sharply from the highs hit in 2022 when energy costs spiked and the cost-of-living crisis was at its peak.

The rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, according to the latest official figures.

But experts suggested that two key economic indicators for the Bank of England – pay growth and services sector inflation – have remained more stubborn.

Average wages continued to increase faster than the rate of inflation last month.

Bank of England not yet ready to cut UK interest rates, experts say

Wednesday 8 May 2024 15:43 , Maryam Zakir-Hussain

UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.

The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.

However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.

This means that there could still be some time before the pressure of the cost of living begins to ease.

Bank of England not yet ready to cut UK interest rates, experts say

Source: uk.finance.yahoo.com

Apache is functioning normally

I don’t usually dive into odd niche topics like this, but I just spent 12 hours car shopping over the weekend. That’s a lot of test drives and awkward conversations with over-enthusiastic salespeople. Sorry, Clayton, I can’t picture myself driving this car off the lot today…why do you ask?

Long story short, I’ve compared tons of cars recently. Hybrids, as you might know, are always more expensive than their all-gas counterparts. But…aren’t hybrids cheaper to operate? Which means…could they save us money in the long run?! This got my finance brain whirring to life.

I wrote an article in 2020 and updated it in 2023 that covers the real, total cost of car ownership. The cost of car ownership can be broken down into 6 main categories:

  • Purchase/Depreciation
  • Financing
  • Maintenance and Repair
  • Fuel
  • Registration/Inspection
  • Insurance

Financing rates, registration costs, and inspection costs are universal for all cars. There’s no difference between a traditional gas car and a hybrid on those axes.

But we know (or at least suspect) purchase costs, maintenance, fuel, and insurance costs will vary between hybrids and all-gas cars.

A Bird in the Hand…

Aesop wrote in 600 BC that “a bird in the hand is worth two in the bush.” Or, in modern terms, “I’d rather have a dollar in my hand today than two dollars in 20 years.”

Money today is worth more than money in the future. This is called discounting. And we’ve used this idea before to analyze mortgage costs.

We’re faced with a similar problem today.

When we buy a hybrid car, we spend more on the purchase price today. But, ostensibly, we save operating costs each year we own the vehicle. However, those future savings are worth less than the extra dollars spent today.

Do we save enough on long-term operating costs to compensate for the differences in sticker price and depreciation? That’s the question!

To answer it, we need to:

  1. Understand the differences in costs between gas cars and hybrids (sticker cost, depreciation, fuel costs, insurance costs, maintenance costs).
  2. Determine an appropriate discount rate for this analysis and apply it.

An Appropriate Discount Rate

As of 2022, the average age of all cars on American roads is 12.5 years. That said, the average car owner has their vehicle for 8 years before (most often) selling it or (less often) it breaks down completely.

Therefore, a happy medium duration for today’s analysis is 10 years. We’re going to look at the differences between hybrids and gas cars over a 10-year life.

How much less valuable is a dollar in 2034 than a dollar today?

Warren Buffett uses U.S. Treasury bond rates as his discount rate. I’m inclined to agree with him. It’s “the risk-free rate.” In any analysis, we can ask ourselves, “Would I rather pursue [this risky option], or simply invest my money in U.S. Treasury bonds for a decade or two?” Good enough for Warren, good enough for me.

As of February 2024, the 10-year Treasury rate is 4.3%. The table below shows how to apply that discount rate to future savings.

Example: I could take $74.47 today, invest it in a 4.3% annual interest bond, and I’d have $100.00 in seven years. Thus, if a hybrid car saves me $100 in 2031, it’s precisely the same as having $74.47 in my pocket today in 2024. A bird in the hand…

How Much Does a Hybrid Save Us?

We need an example of two cars to analyze. Since Kelly and I are currently active car market participants (we’re soon to have a “Baby on Board”…by the way, what’s the deal with those stickers?), I’ve been researching the Kia Sorento. Let’s dig into the details of the all-gas Sorento vs. the hybrid Sorento.

All these details I’m about to share with you are shown mathematically in this spreadsheet. Please feel free to make a copy and play around yourself.

To make a copy of a Google Sheet: File –> Make a Copy

Sticker Price and Depreciation Rate

The gas Sorento starts at $31,990. The hybrid Sorento starts at $36,990.

According to iSeeCars, both vehicles will depreciate 53% in their first 5 years.

Gas Expenses

To calculate estimated gas expenses, we need to understand:

  • how far we drive
  • our miles-per-gallon efficiency of the cars
  • and the cost of gas

Depending on your source, the average American drives between 13,000 and 15,000 miles per year. We’ll use 14,000 miles per year for this article.

The Kia Sorento hybrid gets 35 miles per gallon (we’re looking at the all-wheel drive model, thanks to snowy Rochester winters). The all-gas Sorento gets 24 miles per gallon.

Average American gas prices are currently $3.27 per gallon.

We combine those numbers to find out:

  • The Sorento Hybrid incurs $1308 of gas expenses per year.
  • The all-gas Sorento incurs $1907 of gas expenses per year

Insurance Costs

The average “full coverage” auto policy costs $2000. Your miles may vary (#carjoke).

Insurance is very personal in that nature. Your driving history and desired coverage level significantly affect the insurance premium.

Nevertheless, we’ll use $2000 per year for the all-gas Sorento. Hybrid insurance costs, on average, 7% more than all-gas models; the Sorento Hybrid will cost $2140 per year.

Maintenance

Most sources cite that hybrid maintenance costs are lower than all-gas engines, as hybrids use regenerative braking (fewer brake replacements), don’t use alternators or starters, and tend to have simpler transmissions.

Unfortunately, I cannot find any sources that provide hard numbers to support this claim! If you find something, please let me know.

Therefore, I’m using an average figure of $600 per year for repairs and maintenance and biasing those dollars towards the end of the cars’ lives. Newer cars break down less and are covered by various levels of warranty.

Is it just me, or is that grease very intentional?!

All-In Costs: Hybrid vs. All Gas

Over our 10-year analysis period, the Kia Sorento Hybrid would cost us $55,662 (depreciation + gas + insurance + maintenance), as measured in 2024 dollars.

The all-gas model would cost us $56,491.

Pretty darn close, but it’s a slight nod to the hybrid model. Category-by-category, the results are:

  • The hybrid costs $3000 more in depreciation costs.
  • The hybrid saves $4997 in gasoline costs.
  • The hybrid costs $1167 more in insurance.

And while I’m focusing only on dollars and cents here, there’s an environmental argument too. I won’t dive into the details. But you should probably place a value on environmental costs and benefits (albeit a difficult value to define in dollars and cents).

Of course, this is a perfect example of “average pilot syndrome.” Averages are useful in theory but rarely in practice. You must re-run this analysis for your unique scenario. The first questions that come to mind are:

  • Which specific model are you looking into? It might not be the Kia Sorento.
  • What are the miles per gallon ratios of the all-gas and hybrid models?
  • What are insurance rates like? Not only for your preferred car, but for you?
  • What are the typical maintenance costs of your desired car?
  • How does your car depreciate over time?
  • Should you adjust the discount rate? (PS – you can play around with the spreadsheet yourself, and you’ll see that the discount rate does not change the outcome significantly in this case.)

Was It Worth It?

We’ve covered a lot of conjecture and “what if” questions, made some assumptions, and created a spreadsheet. Is it all worth it?

First, I think I’m directionally accurate. Will the real world play out as I’ve modeled here? Of course not. For all I know, an asteroid will blast our car into smithereens on its first night in the garage (it’ll be a new kind of hybrid; half shrapnel, half vapor). But I think I have a better factual understanding now than I did before. I hope you agree.

This was ~2 hours of work (mainly on the writing, not the math) to optimize an $800 decision. And because I’ve discounted those future dollars, that’s $800 as measured today. Not bad! For some hybrids, this is likely to be a multi-thousand dollar difference. Nice!

Time to unplug, fill up, and peel out.

Thank you for reading! If you enjoyed this article, join 7500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

Want to learn more about The Best Interest’s back story? Read here.

Looking for a great personal finance book, podcast, or other recommendation? Check out my favorites.

Was this post worth sharing? Click the buttons below to share!

Source: bestinterest.blog

Apache is functioning normally

The first workday in January after the holidays hits a little bit differently: The parties are over, debt payments are soon due and it can feel like there’s nothing to look forward to.

You may be able to minimize the doldrums with some planning and other steps to turn things around, financial experts say.

“Financial stress can be temporary,” says Tonya Rapley, financial educator and founder of the millennial money and lifestyle blog My Fab Finance. She suggests focusing on small steps such as paying this month’s bills, then reminding yourself that you can recover from December’s overspending.

Here are a few more ways to fight this month’s financial downers:

Make or update a budget

The new year is a great time to create or update a budget, which can give you back a sense of control, says Mike Croxson, CEO of the National Foundation for Credit Counseling, a nonprofit financial coaching organization.

The popular 50/30/20 budget, for example, suggests putting 50% of your take-home income toward needs, 30% toward wants and 20% toward savings and debt paydown. You can adjust those percentages as needed, especially if you live in an urban area with high housing costs.

“The best way to get control back is to make a plan,” Croxson says. “You can get back on top of this and back to where you feel good about your finances.”

Pay off debt

With interest rates higher than they were a couple of years ago, credit card debt is also more expensive, which makes paying it off a financial priority. How exactly you do that is up to you, Croxson says.

“Paying off the highest interest rate balance first makes the most common sense, but for some people, paying off the smallest dollar amount first is most important because they feel like they accomplished something,” Croxson says. Small wins can give you momentum to continue.

Online calculators for those two methods, known as the avalanche and the snowball, respectively, can help you stay on track.

Track your payments carefully

If you purchased holiday gifts using “buy now, pay later,” which allows shoppers to split payments into multiple installments, then it’s important to note when those bills are due, says Christine Alemany, chief marketing officer for i2c, a global banking and payments platform.

Alemany suggests tracking your buy now, pay later due dates with a financial management tool or spreadsheet to avoid late fees or interest charges. “The variety of payment methods that consumers now have gives them the option to choose what’s best for them,” she says, but “that convenience needs to be balanced by discipline.”

Build up savings

Amid all of that repayment, it’s also important to find a way to save money, Croxson says. “Having a savings line item in your budget is a critical step for virtually every consumer, even if it’s $20 or $25 a month,” he says. “There will be an emergency, and you will need it.” Being able to turn to savings in the future also helps you avoid building up debt again, he adds.

The good news for Americans is that positive signs in the economy, such as a slower rate of inflation and lower gas prices, means it’s a little easier to find room for savings, according to Alan Gin, associate professor of economics at the University of San Diego’s Knauss School of Business.

With gas prices coming down, Gin says, “not only will consumers be more confident, but they will have more money.”

Know your rights

If an expensive item you bought or received as a gift in December breaks in January, that’s another potential downer, which is why knowing your refund rights is critical, says Wayne Hassay, partner attorney for LegalShield, a legal services provider. He suggests keeping track of all paperwork related to the item and any warranty attached whenever you make a big-ticket purchase.

In some cases, paying with a credit card can give you additional protections, he adds. And if your pricey new electronics break, don’t hesitate to follow up with the retailer or brand until you get a satisfactory response, which could be a refund or a new product.

Get help if you need it

Working to pay off debt and get back on budget in January can feel lonely because it’s such a solo activity, which is why it’s helpful to reach out for additional support, whether that’s from financial professionals or friends and family.

“Be honest with people,” Rapley says. She suggests sharing in a friend group chat if you are looking to scale back and spend less, because you’ll likely find encouragement that can help you stay on track. “That communication is definitely important,” she says, and can help you feel less alone — and with more good things to anticipate in the year ahead.

This article was written by NerdWallet and was originally published by The Associated Press. 

Source: nerdwallet.com