INFLATION from 1938 to Now

The big problem today is that incomes are simply not rising fast enough to keep up with the rise in other expenses.  Over time, inflation has a big destructive power.  I thought it would be useful to look at the cost of typical items in 1938 and compare them to where things stand in 2015.

Over a year ago, we looked at some old data and found this to be useful to readers.  I thought it would be helpful to update the data and see where things stand today in 2015.  Someone sent this snapshot of the cost of living in 1938.  It really is fascinating looking at inflation over a very long period of time.  In this case, we are looking at spending pre-World War II.  Most Americans probably have no sense as to what the cost of living was back then since they are mired in the fight of living paycheck to paycheck.

Take a look at the cost of living in 1938:
 

What is important is to look at income in relation to the cost of living.   A new home was about twice the annual average income.  Today, with the median household income being $50,000 and your typical new home costing $298,000 we are definitely on the more expensive side (6 times annual income versus 2 back in 1938).  

Look at the new car costs.  A new car cost about $860 or half of annual income.  Today, a regular car can cost $32,000 and most will need to finance it.  Tuition to Harvard was $420 per year and today Harvard tuition is nearly $62,000 with room and board:
 

In other words, the typical family of today would need to use all their annual income to send their kid to Harvard plus go in debt while in 1938, your average family had income to send 4 kids to Harvard per year.  The most inflated of all categories is college tuition.

Looking at various costs adjusting for inflation

I put this table together and adjusted for inflation to give you a better perspective:
 

New house:                        $298,000 (Source: Census)

Average income:              $28,000 (Social Security)

New Car:                             $32,000 (Bankrate)

Average Rent:                   $950

Tuition to Harvard:          See above

Movie ticket:                     $8

Gasoline:                             $1.99

US Postage Stamp:          $0.49

So basically every single category is up besides gasoline given the crash in oil prices in 2014.  But this is a small drop in the bucket given what consumes the biggest portion of your budget:
 

Housing, food, medical care, transportation, and education make up the biggest expenses.  Housing by far consumes the biggest portion.  And look at how fast prices have gone up since 2000:

Medical care is up over 70 percent.  Housing is up over 40 percent even with the crash in the housing market.  Basically the only items that held steady were apparel and recreation.  But look at how incomes are doing:

Use the gold cards to buy goods in K-Exchange centers.
Click here for more info.