Many Americans say they’re spending more than they earn, dimming their financial outlooks, poll shows

U.S. Economy Demonstrating Unexpected Strength

A significant number of Americans are expressing concerns about their financial futures as they find their household expenses outpacing their incomes. For many, household debt has either increased over the past year or remains unchanged.

According to a recent poll conducted by The Associated Press-NORC Center for Public Affairs Research, about two-thirds of Americans report that their household expenses have risen in the last year, while only about one-fourth have seen an increase in their income.

Despite these challenges, consumer spending has remained strong, defying the effects of ongoing inflation and rising interest rates. The latter has resulted in higher costs for carrying credit card debt and purchasing homes and cars. Some Americans have even found themselves spending more on essential items like groceries, while their incomes have failed to keep pace.

Take Steve Shapiro, for example, a 61-year-old audio engineer from Pittsburgh. He used to spend around $100 per week on groceries, but that figure has now doubled to around $200. Shapiro points out that while the economy may seem prosperous on paper, his personal financial situation does not reflect the same prosperity.

The Commerce Department announced that the U.S. economy grew at a robust rate of 4.9% last quarter, as consumers defied the Federal Reserve’s interest rate hikes and increased their spending. However, David Kelly, chief global strategist at J.P. Morgan Asset Management, warns that consumers’ spending habits may have become somewhat addicted to spending. Kelly believes that it may be wise for individuals to reevaluate their spending in light of their future financial well-being, retirement plans, and aspirations for their children’s education.

Consumer Anger and Dissatisfaction with High Costs

Decades of pervasive advertising have conditioned Americans to buy not only what they need or want, but also everything they can. However, many consumers have expressed frustration with the escalating costs that are beyond their control, such as inflation and the impacts of the Federal Reserve’s interest rate hikes.

The poll revealed that roughly 8 in 10 Americans claim that their overall household debt is higher or the same as it was a year ago. Half of the respondents reported having credit card debt, while 4 in 10 are dealing with auto loans, and about 1 in 4 have medical debt. Only 15% of Americans reported an increase in their household savings over the past year.

Tracy Gonzales, a 36-year-old sub-contractor in construction from San Antonio, Texas, is burdened with thousands of dollars in medical debt from an emergency room visit. She initially believed she had a bad headache, but it turned out to be a tooth infection. Gonzales expressed frustration at the exorbitant bills associated with medical treatment and has even avoided seeking further medical care due to the costs.

Confidence in financial stability remains low among Americans. Only 26% of respondents said they were very or extremely confident that they could pay for an unexpected medical expense, while 18% expressed the same confidence in having enough money for retirement. Just one-third of respondents reported being extremely or very confident that their current financial situation would allow them to keep up with their expenses.

Steve Shapiro, referenced earlier, expressed his disillusionment with retirement plans that now seem unattainable due to his wife’s significant student debt of around $30,000. The couple had hoped to sell their house and move but chose to keep their current mortgage rate of 3.4% rather than facing a higher rate.

Approximately 3 in 10 Americans claimed to have postponed a major purchase due to higher interest rates in the past year. The impending end of the pandemic-era payment pause on federal student loans has also contributed to financial constraints, with nearly 1 in 4 U.S. adults currently burdened with student debt.

The Impact of Inflation

Inflation is a key concern for many Americans, particularly those living on fixed incomes such as retirees. Giuseppe di Clouse, a 77-year-old resident of Westlake, Ohio, pointed out significant price increases, such as a box of movie candy that went from 99 cents to a dollar fifty, representing a 50% price hike.

Opinions on which political party is better equipped to handle inflation are divided among Americans. About 29% believe the Republicans are better suited, while 25% prefer the Democrats. Meanwhile, 3 in 10 respondents trust neither party to effectively address the issue.

Geri Putnam, an 85-year-old resident of Thomson, Georgia, sympathizes with auto workers who are currently protesting their working conditions. She believes their demands are justified, especially when considering the exorbitant salaries of CEOs. Putnam expressed concern over the rising prices of consumer goods and believes that businesses prioritize their bottom lines over the well-being of consumers.

Putnam also noticed that her children are struggling financially more so than her generation did. While they are gainfully employed, she fears that at least two or three of them will never be able to afford a home.

Contrasting Confidence Levels

When it comes to evaluating their household finances, slightly more than half of all Americans consider their financial situation to be good. However, this percentage has decreased from 63% in March of 2022. Older Americans tend to have more confidence in their current financial standing compared to younger Americans. Only 39% of 18- to 29-year-olds view their household finances as good, while 58% of those who are 30 years and older do so.

Americans with higher levels of education or higher household incomes are also more likely to feel secure about their financial situation compared to the general population.

Regarding the nation’s economy, about three-quarters of Americans perceive it to be poor, consistent with measurements from early last year. Regarding retirement savings, 3 in 10 retirees are highly confident in having enough saved, while 4 in 10 have moderate confidence. Conversely, 31% expressed little to no confidence in their retirement savings.

The aforementioned Steve Shapiro, from Pittsburgh, blames the ongoing political turmoil between Republicans and Democrats for harming the economy. However, he remains most frustrated by the increasing prices at the supermarket. Shapiro hopes that President Biden will take action to address the issue. However, Biden’s overall approval ratings have remained consistently low, with 38% of Americans approving of his performance, compared to 61% who disapprove.

The poll results highlight the challenges faced by many Americans as they struggle to keep up with rising expenses, stagnant incomes, and escalating debt. While the U.S. economy may be displaying strength, it is clear that many individuals are not benefitting from this prosperity.