Inflation Impacts Americans – They Spend Less and Save Less

Financial Literacy and Financial Wellness Are Two Different ThingsInflation impacts Americans savings habits.  Rising costs due to inflation have Americans tightening their wallets when it comes to spending, from transportation to groceries to travel.

Inflation was flat in July, after rising 1.3% in June, according to an August 10th report from the Department of Labor (DOL).  Nonetheless, a new report from Forbes Advisor found that Americans are having to make some tough choices.  These choices are amid increasingly higher costs for everyday items such as food, gasoline, and clothing.

Here are 10 ways Inflation impacts consumer behavior, according to Forbes Advisor:

  1. Americans are cutting back on groceries. More than half have cut back on non-essential items when shopping for groceries (51%) and almost half (45%) of Americans have changed their grocery shopping, to buy cheaper alternatives. Two in five Americans are buying less groceries as a result of inflating food prices (39%) and one third have reduced their weekly grocery budget (31%). Moreover, just one in six (17%) say they have not adjusted their spending when shopping for groceries.
  2. People are traveling less due to rising transportation costs. More than half (55%) are reducing the frequency of non-essential journey’s to save money on transportation. Meanwhile, one in five Americans (20%) are cutting back on the number of long journeys they are taking. More than one in six (16%) are walking more frequently to reduce fuel and transportation costs. With costs on the rise, some people may struggle to fill up a full tank of gas at one time as they await more cash. As a result, almost one quarter are putting less fuel in their cars to save spending in one go (24%).
  3. Cooking at home and meal planning is more common. When dining at home, half have cut down on takeout in favor of more home cooked meals (49%). One-third are meal planning more regularly to avoid wasting food (32%) and almost one in three are cooking with more basic ingredients instead of pre-prepared options (29%). More than two in five are using leftovers to avoid food waste (46%), and one in six are batch cooking more often (15%).
  4. More Americans are hanging onto old clothes and shopping for bargains. More than two fifths of Americans are wearing old clothes more often than previously, to avoid spending money on new ones (43%). Two in five Americans are primarily buying sale or discounted clothes, to make up for inflated prices (40%). Within this figure, one quarter (24%) are turning to thrift shops or second hand stores/market places more than ever.
  5. Americans are dining out less. Two-thirds (62%) are choosing to dine out less frequently due inflated prices. One-third are both dining at more affordable restaurants (30%), as well as actively choosing to order cheaper items on the menu.
  6. Leisure spending is down, including date nights. Thirty-nine percent of survey respondents said they’re engaging in fewer leisure activities like concerts, festivals, and going to the movies. This means Americans are spending less time with their friends, as one-third are making social plans less often (30%) and (29%) are socializing with friends at home more regularly. Couples are spending less on quality time together, too. One in five couples are going on fewer date nights to save money (20%).
  7. People are seeking savings where they can. More than one-third have started utilizing coupons more often to save money (37%). Similarly, 25% have swapped their usual products for alternative ones if they can get a similar product using a couponed discount. People are also taking advantage of discounts for buying in bulk, with over a quarter doing so more often (26%). Overall, one in five (20%) have canceled a film and TV streaming subscription to save money on home entertainment.
  8. People are enjoying alcohol less frequently due to inflation. Almost one in five are spending less money on alcohol when dining out (19%) and 17% are spending less on all alcoholic beverages day to day. Over one in 10 wine drinkers are buying less wine during their weekly grocery shops to help curb spending habits (12%).
  9. Gadget and appliance upgrades are less common. One-third of consumers have cut down on money they spend on gadgets and appliances (36%). Of those surveyed, one in five (21%) are using outdated gadgets to save on upgrade costs. One in six (15%) have attempted to fix faulty technology themselves to avoid spending money on new gadgets and appliances.
  10.  Credit usage has changed. More than half of Americans have adjusted their credit card usage in line with inflating costs (50%). This amounts to more than one-quarter of people being forced to use their credit card more often than previously (27%). By contrast, more than two-fifths of Americans are being more careful to use their credit card less than previously (22%).

Inflation impacts Americans as they are spending less.  This is due to inflation; they are saving less, too.  Schwab’s annual national survey of 401(k) participants found that they are saving less for emergencies (20%), investing less outside their 401(k)s (18%) and contributing less to their 401(k)s (15%).  Nonetheless, it may be that as workers spend less, they’ll discover they have more money to save and funnel into their retirement plan at work.  Plan sponsors can play a role in encouraging employees to save for retirement, even in the current inflationary and recessionary environment.  Here are some easy ways to help employees increase retirement savings.

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