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YOUR 2019 BUDGET: WHAT WILL COST MORE (OR LESS) IN THE MONTHS AHEAD?

January 16, 2019
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What will cost more (or less) in the months ahead?

Rising interest rates, falling oil prices, increasing healthcare costs and a softening housing market are among many economic factors that may trickle down to your wallet in 2019. While economic conditions are always subject to change, understanding what may cost more, less, or stay about the same in the months ahead—and why— can help you refine your budget and spending plan in the new year.

What may cost more in 2019? In December, the Federal Reserve (“Fed”) raised the central bank's benchmark interest rate to a range of 2.25% to 2.5%, marking the fourth rate hike of 2018 and the ninth increase since the Fed began raising rates from near-zero three years ago.1 As a result, consumers can expect to see higher interest rates in 2019 for revolving credit card debt as well as auto, mortgage and personal loans.

While rising interest rates may trigger a slight drop in home prices, home inventory fell nearly 5% in the fourth quarter of 2018, resulting in fewer homes available to buyers.2 In addition, rising rates are expected to make mortgages more expensive. Realtor.com estimates the rate for a 30-year mortgage to reach 5.50% by the end of 2019, while real-estate firm Zillow estimated that it could hit 5.80% by year-end. Taking a more moderate stance, mortgage liquidity provider Fannie Mae is predicting that rates will only increase to 5% in 2019.3

According to the Center for Automotive Research, new car prices are expected to rise in 2019, due in part to proposed tariffs on aluminum and steel. Prices for used vehicles could also go up if more consumers decide to buy pre-owned rather than new cars and trucks.4

Healthcare costs are projected to grow 1% faster than the Gross Domestic Product (GDP) in 2019.5 In addition, the standard monthly premium for Medicare Part B increased $1.50 over 2018 rates and the annual deductible for Medicare Part B beneficiaries increased from $183 in 2018 to $185 in 2019. However, for a majority of Medicare beneficiaries, these increases will be offset by the annual Social Security cost-of-living adjustment of 2.8% in 2019.6

What may cost less or stay the same? For the first time in three years, annual prices at the pump are expected to decrease from the previous year. In January 2019, drivers will enjoy the lowest price of the year with an average cost of $2.35 per gallon, according to GasBuddy, an app that provides information on fuel prices and availability at nearby stations. Prices in May are expected to average $2.97 per gallon, making it the most expensive month of the year.7 Other spending categories are expected to remain relatively stable, with little change from 2018 prices, including groceries and tech gadgets.4

Do you have a spending plan in place for the years ahead? We work with our clients to create a roadmap that will anticipate rising costs and prepare them for retirement. Contact us today to schedule an appointment to begin preparing for yours.


1https://www.bankrate.com/banking/federal-reserve/fomc-recap/
2https://www.marketwatch.com/press-release/trulia-reports-housing-inventory-falls-nearly-5-percent-nationwide-as-2018-closes-2018-12-20
3https://www.marketwatch.com/story/why-2019-wont-lead-to-a-home-buyers-market-2018-11-28
4https://money.usnews.com/money/personal-finance/spending/articles/what-will-cost-more-and-less-next-year
5https://www.cms.gov/newsroom/press-releases/cms-office-actuary-releases-2017-2026-projections-national-health-expenditures
6https://www.usatoday.com/story/money/personalfinance/2018/10/12/medicare-premiums-going-up-what-expect-pay/1618044002/
7https://www.usatoday.com/story/money/cars/2019/01/01/gas-prices-forecast-lower-019/2415022002/