Inflation Hits Hard: Over Half Of Americans Dip Into Savings For Daily Expenses

Inflation is hitting households hard, as prices rose 0.5% in January and 6.4% over the past year, per recent reports from the U.S. Bureau of Labor Statistics.

Over half of Americans surveyed in the recent Country Financial Security Index, or 54%, used savings to cover daily expenses like groceries and rent, while 27% had to withdraw money from savings to make ends meet.

A LendingClub report states that about 64% of Americans currently live paycheck to paycheck, a rise from 61% a year ago and matching the previous record high from March 2020. Household budgets have been affected by inflation in the past two years, including regular expenses, according to Greg McBride, chief financial analyst at Bankrate.com.

As stated by Country Financial, Americans feel less financially secure now than they did at the end of 2022, despite high historical wage growth. However, wages are not keeping up with the increased cost of living. Adjusted for inflation, average hourly earnings fell 0.2% in January and were down 1.8% from a year ago, as per a separate report by BLS.

To stay on track during economic uncertainty, Howard Dvorkin, CPA and chairman of Debt.com, advises avoiding borrowing from your future or others. Start with a basic budget and cut expenses where possible, particularly for high-interest debt.

Credit card rates are at a record high, averaging almost 20%, and will continue to increase as the Federal Reserve raises its benchmark rate. If you have credit card debt, consider a lower-interest personal loan or 0% balance transfer card. Avoid using credit for additional purchases unless you can pay the balance in full and save some money.