Written By: Dr. Barbara O’Neill, CFP®, AFC® Owner/CEO, Money Talk Financial Planning Seminars and Publications
Last month, I presented my 8th annual (2022) Personal Finance Year in Review webinar for OneOp. Below are dozens of important events and trends from the past year:
High Inflation– The consumer price index (CPI) started out the year at a 12-month percentage change of 7.5% in January 2022, reached a year-to-year high of 9.1% in June 2022, and stood at 7.1% in November. There was a four-decade high in core inflation that excludes food and energy and inflation eclipsed strong wage gains for many workers.
Inflation Impacts– Higher prices affected the following household expenses: food, restaurant meals, apartment rents, air fares, child-rearing expenses, and utility bills. A majority of Americans (i.e., many Gen Xers and younger ages) experienced high, sustained inflation for the first time in their adult lives.
Interest Rates– The Federal Reserve raised interest rates seven times in 2022 through December, including four rate hikes of 0.75%. It is trying to raise interest rates to cool inflation without causing a recession. Impacts were felt in mortgage interest rates, variable rate credit, and bank savings accounts.
Savings Rates– The U.S. savings rate, which rose to a record 33.8% in April 2020, started the year at 4.7% in January 2022 and declined to 2.4% in November 2022. The average interest rate paid on savings accounts was 0.18% in November, but some online bank money market accounts paid 3% to 3.25%.
Housing– Mortgage interest rates soared past 7% for the first time in more than two decades in October 2022 vs. 3.05% a year earlier. Many home buyers backed out of deals or coped with lock-in fees and higher down payments. Rents increased sharply in the first half of 2022 before gradually subsiding.
Taxes- The average income tax refund in 2022 was $3,039, but some families with advanced child tax credits faced tax payments. Some states held sales tax holidays in response to high inflation. The IRS also issued new guidance for some inherited IRAs.
Credit– 2022 saw the post-pandemic return of unsecured personal loans, rising variable rate interest, and a $30 maximum first-time late fee on credit cards. Medical debt in collections that was subsequently repaid was removed from credit reports and Equifax reported a three-week credit scoring glitch.
Student Loans– Many Public Service Loan Forgiveness (PSLF) qualifying payment rules were suspended through October 31 and the final extension of the pause in student loan payments is sometime in 2023, depending on the timing of the resolution of the court-challenged student loan forgiveness plan that is undecided as of January 2023.
Cars– Monthly car payments crossed a record $700 and the average cost of a new vehicle in November 2022 was $48,281. New cars were in short supply and used car prices exceeded their original value on some models before starting to ease. The average age of vehicles rose to a record 12.2 years in 2022.
Shopping– Buy Now, Pay Later (BNPL) increased in use, both for travel and shopping. 2022 also saw car and electronics supply (and prices) affected by a continued shortage of computer chips, a baby formula shortage, and many consumers returning to pre-pandemic shopping, travel, and entertainment habits.
Insurance– Auto insurance premiums increased due to increased cost of repairs (labor), replacement parts, and car rentals and life insurance sales increased amid COVID fears. Homeowners insurance premiums increased by 12.1% on average and renters insurance premiums averaged $18 per month.
Investing– The stock market faced extreme volatility throughout 2022 and entered bear market territory in September. A bright spot for investors was the 9.62% return on inflation adjusted I bonds from 5/1/22 to 10/31/22, then decreasing to 6.89%. Other popular cash asset havens at year-end were fixed-rate annuities, brokered CDs, and Treasury bills.
For more information about 2022 personal finance events, review this reference list.