76% of Americans Have Curbed Spending Due to Inflation — See What They’re Giving Up
When prices rise, families on a budget have two choices: Earn more or spend less. In 2023, three out of four people chose the latter.
A new GOBankingRates survey of more than 1,000 adults found that 76% of the country trimmed their spending this year to cope with inflation.
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“This indicates that many people are feeling the impact of rising prices and are adjusting their spending habits accordingly,” said Tony Abazi, senior mortgage loan officer and client financial advisor at Neighborhood Loans. “For instance, my clients have been reducing or eliminating discretionary purchases from their budgets, such as dining out, travel and luxury items, in order to afford essential expenses.”
People across the country are making the same tough choices as Abazi’s clients — and they’ve trimmed six spending categories the most.
‘Funflation’ Has Taken the Fun out of Entertainment
Perhaps unsurprisingly, the largest share of the study’s respondents, 57%, said the economic realities of the past year forced them to cut back on entertainment.
It’s easy to understand why.
The cost of everything from concerts to theme parks has soared in the post-pandemic era — a phenomenon the Wall Street Journal calls “funflation” — and more than half the country simply hasn’t been able to keep up.
“Many of my clients have had to adjust their budgets in response to inflation,” said attorney and personal finance expert Loretta Kilday, Esq., of Debt Consolidation Care. “Their main concerns revolve around managing essential expenses like groceries and utilities, which have seen notable price increases. To cope, they are focusing on reducing discretionary spending. The goal is to maintain financial stability by prioritizing and reducing non-essential expenditures.”
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Rising Food Costs Mean There’s Less To Spend on Everything Else
The rising price of food — both at home and away — has far outpaced the general inflation rate in 2023, and 54% of the study’s respondents have changed their eating habits to make ends meet.
But the impact isn’t limited only to the dinner table. The ripple effects of food inflation spread farther than just about any other spending category — as the supermarket bill gradually ticks up, the rest of the budget suffers.
“Grocery prices affect everything in finances,” said Melanie Musson, a finance expert with Insurance Providers. “While people have been eased into higher prices at the grocery store because they shop there every week, less frequently purchased items are causing sticker shock. Groceries and other regular purchases that are more expensive are making it harder to afford the surprisingly higher cost of major purchases like cars, appliances and technology products.”
People Are Taking a Vacation From Taking a Vacation
The third major cutback came in the form of vacations not taken. Even as inflation cooled in 2023, America headed into the busy summer travel season with the price of flights 10% higher than in pre-pandemic 2019.
“People are spending less on leisure and vacations and more on basic necessities like food, climate control and rent,” said Carter Seuthe, CEO of Credit Summit Consolidation. “It’s really having an impact on people’s quality of life.”
Utilities Are Tough To Trim, but People Are Finding Ways
Unlike vacations and entertainment, it can be challenging to cut the cost of utilities — but nearly 18% of the study’s respondents have done exactly that. Many haven’t had much of a choice. Last summer, the price of electricity rose by 2% over 2022, even as overall inflation cooled.
On this front, however, there might be good news heading into 2024.
According to CBS News, wholesale energy prices fall long before the decreases filter down to consumers. Those wholesale prices, which utility companies pay to energy companies, began falling months ago, which means relief could be coming to families any month now.
High Housing Costs Are Keeping Buyers on the Sidelines
Roughly 14% of people have curbed their spending on housing, a cost that both homeowners and renters alike have watched slip increasingly out of reach since the pandemic-era boom.
“Clients are communicating that some costs have risen, but they have not necessarily cut back yet — except for housing,” said certified financial planner Brian Kuhn, senior vice president at Wealth Enhancement Group. “That is a purchase just like anything else; and, between the rising prices and interest rates, they are postponing buying or selling for the time being. This is unfortunate; but, if rates fall again and incomes continue to rise, it could create a bustling market as delayed goals of moving catch up.”
For Many, Inflation Means Retirement Might Have To Wait
Another 12% reduced the amount they’re saving for retirement, which could be the most unfortunate outcome of all — and some experts say those cutbacks apply to emergency funds, too.
“When they’re having to trim their budgets,” Seuthe said, “it comes to not only leisure but also retirement and basic savings just to make ends meet.”
Those With a Plan — and Professional Help — Are Faring the Best
Darius Smith, money coach and founder of Wealth is my Worth, where he teaches high-income earners to build wealth through their careers without entrepreneurship, is proof that rising prices don’t affect just those living check to check.
It also proved that plans prevent pain.
“Inflation has hit everyone hard in 2023,” Smith said. “My clients all use a budgeting system which automates financial priorities like investing, paying bills and debt, fun money and variable expenses, in that order. Because they have control over the top priorities like investing, debt, bills and fun money, the rest of the expenses naturally curb themselves without the uncomfortable friction of budgeting and cutting costs.”
Structured plans like this can spare households from having to make the toughest decisions — especially those that are able and willing to invest in professional help.
“I’ve been offering personalized advice and strategies to help my clients navigate this difficult economic climate,” said Nathan Richardson, founder of the banking and financial services site Complex Search. “This includes identifying areas where they might be able to save money, such as switching to more cost-effective brands or finding alternative modes of transportation. We also talk about how to prioritize needs over wants and how to create a realistic budget that accounts for inflation.”
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This article originally appeared on GOBankingRates.com: 76% of Americans Have Curbed Spending Due to Inflation — See What They’re Giving Up
