Why Is Everything So Expensive? How To Surf the Economic Waves

Groceries. Gas. Rent. Travel. Why is everything so expensive? 

If you’ve been pondering this question a lot recently, you have good reason. It’s not an illusion—life is damn expensive these days. 

There’s no use sugarcoating it. Times are tough for a lot of people, and the generation currently entering the job market has an uphill battle like no generation before them. 

There’s a follow-up question that usually comes when people ask, “Why is everything so expensive right now?” Next, they want to know what to do about it. 

So, in this article, we’re going to break down what’s causing everything to be so expensive in 2025 and likely 2026 too, and then show you ways to protect yourself in an uncertain economy.

Why is everything so expensive? The big picture

“Why is everything so expensive?” is a really complicated question—no surprises there. That’s why there’s an entire industry dedicated to economics. 

But we won’t go too deep into the economics jargon in this article. Instead, let’s look at a few of the big causes for why everything is so expensive right now, as well as get some historical context to explain it.

Inflation is really high for a number of reasons

If you follow the news at all, you’ve likely heard plenty of talk about inflation over the last few years. And even if you aren’t a news consumer, you’ve probably felt the effects of inflation when you’ve been grocery shopping, eating out, or looking for a new apartment—it feels like everything is more expensive because it is! 

In simple terms, inflation means the prices of many everyday expenses are increasing. In turn, the value of a dollar is decreasing. 

Inflation happens from time to time and is a natural part of the economic cycle—but the period of inflation we’ve experienced over the past few years (as of this article’s update in May 2025) is particularly rough. And for people in their twenties, it’s the worst it’s been in their lifetimes. 

What’s causing inflation to be so high this time around? Well, there are a few things to blame. 

We need to rewind back to 2020, to the start of the Covid-19 pandemic. During this time, the world saw record highs of unemployment, matched with low spending in many sectors (like restaurants and hospitality) and high spending in other areas (like online shopping) during the height of the lockdowns. 

Though many people struggled financially during the pandemic, some workers (those who were able to keep their jobs and work remotely) were able to save up a lot of cash. 

As we emerged from the worst of the pandemic, people who had savings began to spend at an unprecedented rate. But there was another pandemic-related issue causing problems: the supply chain. 

“Supply chain” is a term for the process of getting products from manufacturers to their final destination (whether that be a store or your doorstep). It involves a lot of work, and the pandemic caused more than a few breakdowns in the whole thing. 

These two factors, along with major fluctuations in the job market (also caused by the pandemic), essentially led us to the high inflation rates we started seeing in the early half of this decade.

The good news is that inflation rates have started to decrease. The Bureau of Labor notes that in March of 2025, the cost-per-item (which is a measurement of inflation) decreased for the first time in 12 months. Though the decrease was only slight at -0.1%, it could be a sign that inflation is reversing or at least slowing. But only time will tell, so check back as we continue to update this article.

Tariffs and economic uncertainty are driving up prices

Since the 2024 election, the Trump administration has made sweeping changes to economic policies. It’s common for a new president to naturally cause some economic uncertainty as they roll out their agendas and spending bills—but the dramatic changes and ensuing uncertainty we’ve seen since Trump took office have been unprecedented. 

Tariffs are at the core of Trump’s economic policies. The president suggests that tariffs are both a strong negotiating tactic and a way to bring long-term economic growth to the US. 

Most economists, on the other hand, say that these tariffs are likely to drive up prices even further. The businesses importing goods are the ones who have to pay the tariffs, and in most cases, businesses are likely to pass that cost on to the consumer. 

Since taking office, Trump has repeatedly reversed course on tariffs, frequently pausing them for up to 90 days, or lifting them for some markets and not others. This back and forth causes volatility in the stockmarket. In turn, this causes economists and business leaders to be more cautious—which often means increasing prices for consumers to shore up revenue. 

In fact, there’s already evidence of this happening. In an interview with CNBC, CEO of Proctor & Gamble Jon Moeller said tariffs, among other economic factors, will likely prompt the company to raise costs in 2026. P&G makes many of the products you probably have in your home, and that’s just one company—we have yet to see how many other businesses will follow suit. 

Trump’s tariffs have the capacity to impact prices in many parts of everyday life, from video games to construction costs. One of the places where we may feel the most intensely, however, is at the grocery store. 

Around 15% of food in the U.S. is imported, including more than half of all fresh fruit and 94% of seafood, reports USA Today. That means tariffs will probably cause the price of all those food items to increase for the foreseeable future.

There’s a housing shortage making property expensive

If you’ve been considering buying a piece of property or even renting from a property owner, you’ve probably heard all of the nightmare stories from both buyers and sellers trying to succeed in the current housing market.

This again ties into the supply and demand issues. For some time now, there have been more people looking for homes than there are properties to buy. On top of this, interest rates on mortgages remain high, with the average 30-year fixed-rate mortgage sitting at approximately 6.755% as of March 2025, according to Fortune. This is a stark difference from the record-low average of 2.65% seen in January 2021.

These two factors together mean current homeowners don’t have much incentive to sell. Their homes are likely locked in at a lower interest rate from a few years ago, so they’d be paying more interest if they did sell. And because so many people want homes, they can sell their properties for incredibly high prices—making it harder for people who don’t have much capital to get a home at a decent price in many areas around the United States.

Wages are stagnant, while virtually everything else gets more expensive 

A longer-term issue than the current economic atmosphere is one answer to the question: “Why is everything so expensive?” 

In short, over the last few decades, wages have increased very slowly, despite virtually everything else becoming more expensive.

via The World Economic Forum

Here you can see that wages in March of 2019 were equal to those in the 1970s.  Of course, rising inflation over time means that $23.24 is worth a lot more in 2025 than 1973. But even when calculating for inflation, the increase in wages doesn’t make up for the massive increase in the cost of living:

via Consumer Affairs

via Consumer Affairs

So the next time you get some bad advice from your parents or grandparents about how they were able to afford a house and college and only earn $12 an hour, just remember—economically speaking—they had it way easier than you.

Hidden price increases: Tips, shrinkflation, and subscriptions

Beyond the obvious inflation we’ve all been experiencing, there are several sneaky ways life has gotten more expensive in 2025 that don’t show up in official inflation numbers. Let’s focus on three of them: 

First is the dramatic expansion of tipping culture. What was once limited to sit-down restaurants has spread to nearly every service interaction. 

Digital payment screens now prompt for tips at coffee shops, retail stores, fast food counters, and even some medical offices. These pre-set options (typically starting at 15% and going up to 25%) create social pressure to tip in situations where it wasn’t expected just a few years ago, effectively raising prices above their stated amounts.

Then there’s “shrinkflation,” the practice of companies reducing product sizes while keeping prices the same. Next time you’re at the grocery store, check out your favorite cereal box, bag of chips, or roll of paper towels—chances are they contain less product than they did a year or two ago. Companies often redesign packaging to make these reductions less noticeable, hoping consumers won’t realize they’re getting less for the same money.

@rawr_its_paige Is nothing sacred anymore?!? #millennial #juice #apple #tropicana #economy #shopping #finance #wheresthejuice #humor #adhd #neurodivergent #shrinkflation ♬ Monkeyshine-JP – Lt FitzGibbons Men

Finally, there’s the subscription economy that’s slowly draining our bank accounts. 

There was a time when you could buy software, movies, or music with a one-time payment? Those days are gone, replaced by monthly or annual subscription fees and ever-increasing pricing tiers that can leech your finances without you even noticing. (For a truly chilling take on this phenomenon, check out the first episode of the latest season of “Black Mirror” called “Common People.”)

These are just three examples of the many ways corporations try to syphon as much money out of their consumers as they can. Think about all of the times in life you have to pay extra fees—$30 for a checked bag, a $200 service charge on that Airbnb, $7 for the reclining movie theater seats. 

These three trends represent a fundamental shift in how we pay for goods and services. And while each individual change might seem small, together they’re making everything more expensive in ways that aren’t captured by traditional inflation measures.

The result: a wage gap that’s particularly hard on young people

Rising inflation, soaring house prices, sneaky hidden costs, and stagnant wages: these four factors unfortunately combine into a very toxic economic situation that has created an extreme wealth gap between generations. 

Many Baby Boomers and Gen X-ers graduated from college with minimal student loans and could afford to buy property in their 20s or 30s, thanks to lower housing prices and higher wages (balanced for inflation). 

Meanwhile, Millennials and members of Gen Z are stuck earning low wages while watching the price of nearly everything skyrocket. Many young people feel owning a home (or even living on their own) is simply out of reach forever, and many are holding on to major student loans on top of that. 

But all hope is not lost! It’s true, the economy is suffering right now. Hopefully, it’ll course correct in the near future. But in the meantime, there are lots of things anyone can do to get through this current period. 

How to manage your finances in tough economic times

Below you’ll find lots of advice for getting through tough times financially. But be sure to check out our other resources that make up our full guide on how to make money in college: 

Get in the right money mindset, then start budgeting

When your bank account is low and your bills are high, it’s challenging to think about money without feeling anxious and overwhelmed. 

But if you aren’t able to sit down and look at your money, it will only make the anxiety worse. Instead, you need to become comfortable regularly examining your income and expenses, so you can figure out the magic information: 

How much money do you have coming in, and how much do you have going out? 

Answering this question month-to-month will make everything in life easier, even if it’s painful to uncover that equation. Once you have it, you’ll be able to start budgeting, and that’s the key to financial stability. 

You can make this process easier by starting a budget. Once you begin tracking your expenses like rent, groceries, and entertainment, you’ll only need to compare that figure to how much income you have coming in each month. Then you can start looking for ways to improve your budget. 

Fortunately, we have just the thing to help you get started. You can check out our full guide to budgeting for college students or download our free budgeting template right here: 

Set long-term financial goals (even if you can’t save for them yet)

Once you’ve gotten a handle on your monthly budget, it’s time to step back and think big-picture. Though it may seem like you don’t have any extra money to set aside now, it still pays to start planning ahead for your future as early as possible. 

Start asking yourself questions like… 

These are big questions, and it’s impossible to predict the future. But by asking yourself these questions, you can start to figure out how much money you would be setting aside in an ideal world. 

You may not have money to set aside now, but by cutting some spending (see the next section) and using any extra income, you can start chipping away at your goals bit by bit.

Try these creative ways to cut spending

If you’ve looked at your budget and realized you don’t have enough money coming in to cover all your expenses or save for your long-term goals, the next step is to find places where you can cut spending. 

Limiting spending usually isn’t fun, but with some creativity, you can find ways to cut back that aren’t painful. Here are some ideas: 

Make a spending “pain scale” 

Look at your spending and start scoring different items on a scale of 1 through 5, with 1 being “not painful to stop spending” and 5 being “impossible to stop spending.”

For example, you might mark the amount of money you are spending on restaurants as a 2—you enjoy eating out, but it’s not as painful to cut back on restaurant visits as some other things on your list. On the flip side, your gym membership might be a 4 because working out is very important to you, and things like rent and loan payments certainly get a 5. 

Once you have a pain scale, you’ll have an easier time identifying where you should cut spending.

Think of it as replacing, not spending less 

If you approach your spending cuts as though you’re removing fun things from your life completely, you’ll end up feeling discouraged (and more likely to break your good spending habits). 

So instead of thinking of this as a slash-and-burn exercise, find ways to replace the things you’re cutting with less expensive but still enjoyable options. For example: 

These are still lifestyle changes that may cause some discomfort. But cutting your spending this way is a lot less painful than giving up things you enjoy altogether. 

Gamify your spending cuts 

If you have another friend or a partner who’s also trying to save, you can maximize your spending cuts by turning it into a friendly competition. 

For example, compete with friends to see who can host a dinner party using the least expensive ingredients. 

Or perhaps you and your partner can make a deal—whoever spends less excess money for the month gets a prize of some sort (like a free back rub or the option to choose the restaurant you go to as a celebration). 

Consider new sources of income

Cutting back on spending is a great way to save money in the short term. However, if you really want to change your financial situation, finding alternative sources of income might be the best path. 

We have lots of resources to help you do just that—whether you want to get a raise, find a new job, start a side hustle, or just earn some cash on the side. 

Fight for your own future

Learning how to budget, cut spending, and grow your income will make navigating these challenging financial times much easier. Eventually, this period of high inflation will end. But it’s important to remember that long-term issues are still at play. 

Do you want things to change so people no longer ask, “Why is everything so expensive?” Get out and make your voice heard. Advocate for fair wages and housing prices, or else all future generations will face the same challenges we’re dealing with today.