As financial pressures grow, 1 in 3 Americans are cutting their spending

Grocery expenses have increased the most over the past year
By Sam Bourgi
•
05 September 2024
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americans, finances

According to a recent TD Bank survey, 30% of Americans have cut back on their spending due to concerns about personal finances and the economy.

TD’s annual Consumer Spending Index revealed that 50% of respondents said their spending on groceries has increased the most over the past year. More than half (58%) said groceries account for the largest share of their monthly expenditures.

This explains why 42% of respondents have changed their financial priorities over the past year. Within this group, 27% say managing daily living expenses has become the top priority.

Overall, 67% of respondents said they’re dealing with some level of financial stress due to rising costs.

“The daily cost of living is rising for many Americans,” said Chris Fred, head of credit cards and secured lending at TD Bank.

Overall, consumers are paying nearly 21% more for goods and services than they were four years ago. Grocery prices are up 25% over that period.

Fred recommended that consumers utilize cash-back programs or credit cards with low interest rates to better manage their expenses. Unfortunately, with credit card APRs at record highs, that’s easier said than done.

With wage growth stalling and stubborn inflation still biting, Americans across all income brackets are feeling the pinch.

Even higher-income earners are beginning to struggle

Lower-income consumers face the biggest risk from elevated inflation, as more of their income goes toward essential living expenses like food, rent, and utilities. They have a smaller buffer to absorb higher costs than high-wage earners.

However, according to Mizuho Financial Group, stress is also starting to be felt among higher-wage earners.

A recent survey from the financial firm revealed that both high-end and low-end consumers are pulling back on non-essential expenses, such as restaurants.

A large number of high-income respondents “report elevated credit card balances and some signs for potentially tighter spending through year-end (restaurants, electronics, and even children/pet care),” said John Baumgartner, a managing director with Mizuho.

Analysts at Goldman Sachs have also acknowledged that consumer spending is weakening across the board but said it’s not cause for alarm yet.

The real challenge will be whether Americans can maintain their spending pace in the face of rising unemployment and a volatile stock market, which economists say can diminish the wealth effect that often leads to higher consumption.

The Mizuho survey raises the age-old question of how much income is really enough to lead a comfortable life. According to a recent Creditnews Research study, earning $100,000 is considered working-class income in 85% of America’s largest metro areas.

In many parts of the country, $100,000 isn’t enough to cover basic living expenses for an average family of four, when factoring in food, transportation, shelter, childcare, and other basic needs.

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