Inflation remains at a 25-year high, causing Americans to change their habits, sell belongings, and dip into savings and retirement accounts.
Key Details
- Last year, the Consumer Price Index for All Urban Consumers saw its largest 12-month increase since 1981, jumping 9.1%.
- As consumers face difficulties from student loan debt, higher rent prices, and generally higher living costs, many have had to change their habits and priorities when budgeting.
- To offset higher costs, many have chosen to sell personal belongings, pull money from savings and retirement accounts, start new jobs or side hustles, get a roommate, or move back in with family.
Why it’s news
Persistent inflation is starting to change consumer habits and priorities. While inflation may begin to cool off, the effects on spending habits may be longer-lasting than the inflation itself.
According to a U.S. World and News report, over 70% of survey respondents say inflation personally affected their financial decisions in 2022. However, these consumers are optimistic about the coming year, as 61% reported that they expect 2023 to be a better year for them financially.
Inflation significantly affects where people live. Around 71% say that owning a home is a long-term goal of theirs, but 71% have doubts that the next generation will be able to own a home. Respondents say the next generation will struggle more than theirs regarding home ownership. Inflation also made around 59% of those surveyed consider moving to another city where the cost of living was lower.
With higher housing costs, some have been forced to move back in with family or find roommates. Around 59% of those who have made these living adjustments said that inflation made covering day-to-day expenses more difficult. Another 56% said they had difficulty paying their mortgage or rent, while 54% reported trouble paying utility bills.
However, most respondents’ grocery bill was the most challenging price hike. From August 2021 to 2022, food prices increased 13.5%. Rent prices were the next most difficult price increase for 56% of survey respondents.
Many Americans could not afford to pay their food and housing bills, prompting many to change their living arrangements. Over half of the respondents considered their current financial situation a long-term issue, resulting in them considering long-term solutions such as moving to lower-cost-of-living areas. Around 54% said that inflation would need to decrease before they could consider moving out of their family home, and another 52% said they would need a pay increase before they could move out if inflation does not fall.
While cities like Los Angeles, San Diego, and Miami offer plenty of job opportunities, increasing prices push residents out of the areas. Around 59% of respondents said they have considered moving to save on expenses, while another 10% have officially decided to move.
Even if inflation suddenly declines, the effect on the American consumer may be longer-lasting. While 61% of Americans believe this year will be better for them financially, experts think it will take several years for Americans to recover financially from the increased costs of the two years.
