Why Is the Cost of Living Going Up? 5 Tips for Consumers

The issue of affordability has been dominating headlines. Cost of living has been on the rise given the collision of two forces: sticky inflation and weak job growth.

Consumer prices saw a slight increase in recent months. According to the Consumer Price Index, after falling to a four-year low of 2.3% in April, annual inflation reached 2.7% in November 2025.

Slow wage growth and a disrupted job market 

Several years ago, inflation rose because of the COVID pandemic and supply-chain gaps. Since then, wage growth has not kept pace with inflation, and many consumers have been feeling the strain in their wallets.

Slow wage growth is also typically a sign of a troubled job market. According to the Bureau of Labor Statistics, the unemployment rate hit 4.6% in November 2025.

A weak labor market tends to result in lower wages, and if there’s increased competition for jobs, it can reduce a worker’s bargaining power, as employers have less reason to raise wages.

Powell’s panacea: a better job market

On December 10, 2025, after the Fed cut interest rates, Federal Reserve Chair Jerome Powell remarked at a press conference that boosting the job market might help to alleviate some of the cost-of-living challenges for consumers.

“We are going to need to have some years where real compensation is higher … for people to start feeling good about the affordability issue,” he said. “We are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money and feeling economically healthy again.”

A financial rule of thumb for uncertain times

While broader macroeconomic forces like inflation and the job market are out of our control, as a consumer, there are several positive steps you can undertake to prepare for the future and weather today’s uncertainty.

Generally, consider the flight to safety principle, an investing philosophy also known as capital preservation (or preservation of capital). The idea is to protect your savings and your raw capital in such a way that outside economic forces can never touch them. (Once you lose precious capital you’ve worked hard for, it can be difficult to access that economic power again.)

Think about putting your money in an FDIC-insured high-yield savings account or high-yield certificates of deposit (CDs). Many banks and financial institutions offer these accounts.

Here are five more tips you may want to consider.

1. Think before you buy

Be mindful about money management. Ponder twice before you spend your dollars. Do you really need to buy the most expensive sports car you can?  Is that expensive piece of artwork something you can’t live without?

Release your capital for a reason—not an impulse. Ask: How am I spending my money? This discipline can help reduce financial stress. For example, you may want to:

• Set your spending agenda to accommodate both necessities and discretionary purchases.
• Consider buying in bulk and generic brands to enjoy economy of scale.
• Watch for sales and use discounts if they deliver substantial savings.