Where consumers plan to cut spending as high inflation persists

According to Momentive’s CNBC + Acorns Invest in You survey, more than 50% of adults say they will cut restaurant spending and consider further reducing it if inflation persists.

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Inflation continues to rise, prompting consumers to change their shopping habits to keep up.

The consumer price index rose 8.3% in April from a year earlier, the US Bureau of Labor Statistics reported on Wednesday.

While the reading represented a slight decline from the previous month’s 8.5% gain, it still represented inflation near a 40-year high.

“The pace of price increases has slowed, but not as much as expected,” Greg McBride, Bankrate’s chief financial analyst, said in a statement. “Barring a fall in energy prices – which seems outdated at this point – hikes remain widespread.

“As the annual rate declines to 8.3% from 8.5%, it may be tempting to say we’ve seen the peak, but we’ve also been left headless before, as was the case last August.”

According to Momentive’s CNBC + Acorns Invest in You survey, more than 50% of adults say they will cut restaurant spending if price pressures continue. The online survey of nearly 4,000 adults was conducted March 23-24.

People are also cutting back on driving and subscriptions, and some are canceling vacations, the survey says.

“It was amazing,” said Tania Brown, an Atlanta-based certified financial planner and founder of FinanciallyConfidentMom.com.

Rising prices in mind

Although inflation was not that high overall in April, there was some bad news. The reading was higher than estimated and core inflation, which masks out volatile food and energy prices, was also higher than expected.

That means many Americans are now spending more on essentials, tightening their budgets without changing their habits. People notice these migrations and pay more attention to them. Nearly half of all adults said they constantly think about rising prices, while 55% of those with annual household incomes of $50,000 or less keep checking costs, according to the CNBC survey.

“Focusing on your spending is always a good strategy,” said Susan Greenhalgh, an accredited financial advisor who directs Mind Your Money in Hope, Rhode Island. “You really can’t understand what’s happening to your money unless you look at it and measure it.”

Keeping track of what you’re spending can also help you determine exactly where to save, she said, since inflation hits everyone differently. If you’re someone who doesn’t eat out much but is being pummeled by gas prices at the pump, cutting back on your driving is likely to help your budget more than skipping a few dinners at a restaurant.

It’s also important to monitor and compare your spending month-to-month since prices are increasing so quickly. You may need to make adjustments more frequently than in the past.

“Goal #1, no matter what, is to protect the essentials, and those are food, shelter, basic transportation and basic medical care,” Brown said.

How to fight inflation

Inflation could continue to run hot, putting budgets under even more pressure. More than 75% of adults said they are concerned that higher prices will force them to reconsider their financial decisions, the survey found.

The impact will be hardest on those on the lowest incomes, who may be pushed into survival mode, Brown said. For those struggling to cut spending even further, she also said they should reach out to creditors and lenders to see if they can defer payments.

Some people may also qualify for utility bill assistance programs, which could help with monthly expenses, Brown said. It might also be time to dive into emergency savings to cover your essential expenses, should the need arise, she added.

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Those with higher incomes will also need to adjust, especially if they want to save at the same rate as before inflation rose, Greenhalgh said.

Of course, if your budget is tight, you’ll have to cut back on your savings to avoid going into debt. If that’s the case, both Brown and Greenhalgh suggest consistently setting aside smaller amounts to maintain the saving habit.

“As long as you’re pointing things in the right direction, that’s great,” Brown said.

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Disclosure: NBCUniversal and Comcast Ventures are investors acorns.

https://www.cnbc.com/2022/05/11/where-consumers-plan-to-cut-spending-as-high-inflation-persists.html Where consumers plan to cut spending as high inflation persists

Gary B. Graves

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